Boosted by strong holiday sales, Target Corp. (TGT, Financial) recorded better-than-expected financial results for fourth-quarter and full-year 2018 before the opening bell on Tuesday, sending shares up 6%.
The Minneapolis-based retailer posted adjusted earnings of $1.53 per share for the quarter, beating Refinitiv’s estimates of $1.52 by a hair. Revenue of $22.98 billion was flat from a year ago, but topped expectations of $22.96 billion. Comparable sales, a closely watched metric, grew 5.3%, ahead of expectations of 5.1% growth. Target noted brick-and-mortar store sales gained 2.9% during the quarter, while online sales were up 31%.
For the year, Target reported record adjusted earnings of $5.39 per share on $75.36 billion in revenue, which was up 3.6% from 2017. Same-store sales increased 5% for the year, marking its strongest growth since 2005. E-commerce sales climbed 36%, achieving its fifth consecutive year of digital sales growth of more than 25%.
While other big-box retailers’ holiday quarter failed to impress, Target’s investments in its online business and delivery options appear to be paying off. In order to more effectively compete with Walmart Inc. (WMT, Financial) and Amazon.com Inc. (AMZN, Financial), the company has also been remodeling its stores and developing its own in-house brands, which helped drive traffic up 4.5% and caused the number of overall transactions to rise 5.3%. The average transaction amount grew 0.8%, which was up from 0.4% in the prior-year quarter.
“We have been driving an ambitious agenda to transform our company, evolve with our guests and drive strong growth,” Chairman and CEO Brian Cornell said. “On every count we’ve been successful, and as we enter 2019, we will continue to lead the industry by adapting, innovating and delivering more for our guests and shareholders.”
Looking ahead, Target is guiding for adjusted earnings between $5.75 and $6.05 per share in 2019. It also anticipates a low-to-mid-single-digit increase in same-store sales and mid-single-digit growth in net income.
With a market cap of $39.4 billion, Target’s shares were trading around $75.50 on Tuesday. After gaining 1% in 2018, GuruFocus estimates the stock has climbed 15% year to date.
According to the industry overview page, Target is the fourth-largest company in the defensive retail sector, behind Walmart, Costco Wholesale Corp. (COST, Financial) and Walgreens Boots Alliance Inc. (WBA, Financial).
Disclosure: No positions.
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