Target profits surge in Q4

Fourth-quarter profits at Target surged 53% as same-store sales turned positive and activity picked up in discretionary categories. The company reported fourth-quarter earnings per share of $1.24, exceeding analysts’ consensus estimate of $1.16 and far exceeding the prior-year fourth-quarter profit figure of 81 cents.

The results reflected substantial innovation and disciplined execution, according to Target chairman, president and CEO Gregg Steinhafel, who noted that the company’s retail performance was well above expectations thanks to stronger-than-expected holiday sales and inventory and expense control.

“In 2010, we expect our guest traffic trends and sales of discretionary categories to benefit from broader implementation of our new merchandise initiatives as well as a continued modest recovery in the economy and believe Target will continue to gain profitable market share,” Steinhafel said.

Fourth-quarter same-store sales were modestly positive at 0.6%, but that improvement helped the company achieve a significant rebound in profits. Profits also benefited from fewer markdowns and the improved performance of discretionary categories that offset the negative gross margin effects of Target’s increased emphasis on food and consumables. Overall, the company’s fourth-quarter gross margin rate increased 1.8% to 29.1%.