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Shares of Target Corp. seesawed to a slight gain Tuesday, after the discount retailer reported beat fiscal fourth-quarter earnings that beat expectations and a surprise increase in revenue, but provided a downbeat profit view.
The stock
TGT,
was up 0.2% in ahead of the open, but had down as much as 4.8% and up as much as 5.5% earlier in premarket trading.
Net income for the quarter to Jan. 28 fell to $876 million, or $1.89 a share, from $1.54 billion, or $3.21 a share, in the same period a year ago. Excluding nonrecurring items, adjusted earnings per share of $1.89 was well above the FactSet consensus of $1.40.
That snapped a three-quarter streak of missing profit expectations.
Revenue rose 1.3% to $31.40 billion from $31.00 billion, while the FactSet consensus was for a decline to $30.68 billion. And same-store sales rose 0.7% to beat expectations of a 1.6% decline.
“We’re pleased that our business delivered comparable sales growth in the fourth quarter, in what continues to be a very challenging environment,” said Chief Executive Brian Cornell. “Strength in Food & Beverage, Beauty and Household Essentials offset ongoing softness in discretionary categories.”
Cost of sales grew more than revenue, up 5.2% to $23.95 billion, as gross margin contracted to 23.7% from 26.6%.
The value of inventory was $13.50 billion as of Jan. 28, that down 2.9% from $13.90 billion a year ago.
It was the shedding of excess inventory that led higher discounting and earnings misses in the past three quarters.
Analyst Michael Baker of D.A. Davidson reiterated his buy rating on Target’s stock, saying he believes the inventory issue is now in the past.
“We think [Target] has successfully worked through the inventory issue and we expect much fewer markdowns in 2023,” Baker wrote in a note to clients.
Looking ahead, the company expects first-quarter adjusted EPS of $1.50 to $1.90, which is below the FactSet consensus of $2.15. Target projects full-year EPS of $7.75 to $8.75, which is also below expectations of $9.18.
The stock has gained 0.9% over the past three months through Monday, while the Consumer Discretionary Select Sector exchange-traded fund
XLY,
has advanced 2.7% and the S&P 500
SPX,
has tacked on 0.5%.
