Joining a slew of retailers who saw better-than-expected holiday sales, Target Corp. (TGT, Financial) reported on Tuesday its same-store sales during the Christmas season grew 3.4%, topping estimates of 0 to 2% growth, and raised its earnings outlook for the fourth quarter and full year.
The Minneapolis-based company has implemented several strategic initiatives over the past year to improve its business, including renovating stores, introducing delivery services and focusing on customer experience. The impact of these initiatives, according to Target Chairman and CEO Brian Cornell, is reflected in its holiday sales performance.
"We've positioned our stores at the center of a continually expanding suite of convenient fulfillment options and made significant investments in our team, which enabled our stores to fulfill 70 percent of all digital orders in the November/December period,” he said.
The company said same-store sales in November and December accelerated from the third quarter across all five of its major product categories. In addition, the retailer anticipates 2017 will mark the fourth consecutive year in which digital sales surpass 25% growth.
The company’s revenue growth over the past decade is illustrated in the graph below.
Following the announcement, Target's shares gained more than 3% to trade around $69.25 on Tuesday morning. Year to date, the stock has lost 1%.
As a result of the higher-than-expected sales, Target raised its sales guidance for the fourth quarter and fiscal 2017. It now anticipates comparable sales growth of 3.4% for the fourth quarter and more than 1% for the year.
Bolstered by the recent passage of the tax reform bill, the retailer also raised its earnings expectations. Earnings per share for the quarter are expected to range from $1.30 to $1.40, up from the previous guidance of $1.05 to $1.25, and full-year earnings per share are projected to range from $4.64 to $4.74, up from the previous range of $4.40 to $4.60.
In addition to further profit growth, Target said the tax reform legislation should also generate increased cash flow in 2018, which will be used for capital investments, dividends and share repurchases.
“As we look ahead to 2018, we will build on the foundation we established this year by launching additional exclusive brands, enhancing our digital capabilities, opening approximately 30 small-format stores and tripling the size of our remodel program to more than 325 stores,” Cornell said.
Target is scheduled to report its fourth-quarter and full-year 2017 results in March.
Disclosure: I do not own any stocks mentioned.
