Target’s heavy discounting during the crucial year-end shopping season squeezed fourth-quarter profits. But its trendy assortments and spiffed up presentations induced shoppers to spend more.
The Minneapolis-based company also offered an upbeat outlook.
The results, released Wednesday, show Target has made solid progress in reinvigorating its business and winning back shoppers. It initiated an aggressive plan to regain its cheap chic status in 2014 under new CEO Brian Cornell after a series of headline grabbing setbacks, including a major credit card breach that hurt sales and profits for months.
Under Cornell, the company got rid of its money-losing Canadian operations and it shook up its leadership ranks.
During the recession, the company appeared to lose its mojo when its focus shifted to an expanded grocery section. It seemed slower in getting ahead of style trends then it had in the past.
This past holiday season, Target battled it out with Wal-Mart and online leader Amazon.com, heavily discounting goods, and brought back free shipping online. Traffic in stores rose and online sales surged 34 percent, after online sales jumped 30 percent in the quarter before.
The maneuvers helped drive comparable-store sales up by 1.9 percent, the sixth consecutive quarterly increase. Customer traffic rose for the fifth quarter in a row.
In the same quarter, Wal-Mart stores in the U.S. recorded a 0.6 percent increase in revenue at stores opened at least a year. Global online sales for Wal-Mart Stores Inc. slowed to 8 percent.
Target earned $1.43 billion, or $2.32 per share in the quarter ended Jan. 30. That compares with a loss of $2.64 billion, or $4.10 per share in the year-ago period, when the company incurred hefty charges related to its retreat from Canada.
The heavy competition that forced steep discounts did take its toll.
Adjusted earnings results were $1.52 per share, a bit below the $1.54 per-share projections from Wall Street, according to FactSet.
Revenue slipped 0.6 percent to $21.63 billion on the sale of its pharmacy business to CVS, also just shy of Wall Street expectations.
That revenue metric for its so-called signature categories – fashion, baby, kids and wellness, grew more than three times faster than the company average during the fourth quarter.
“Target’s results demonstrate that we are focused on the right strategic priorities,” said Cornell in a company release.
Target now expects first-quarter profits of between $1.15 per share and $1.25 per share. For the full year, it expects adjusted profit to be $5.20 to $5.40. Analysts expect $1.19 for the first quarter and $5.17 for the year.