Target Q4 beats Street; sounds warning on impact of tariffs
Target Corp. reported a strong fourth quarter with better-than-expected earnings and sales, but warned of a rough first quarter amid soft February sales and tariff uncertainty.
“In light of ongoing consumer uncertainty and a small decline in February net sales, combined with tariff uncertainty and the expected timing of certain costs within the fiscal year, the company expects to see meaningful year-over-year profit pressure in its first quarter relative to the remainder of the yea,” Target said in the earnings release.
Target CEO Brian Cornell told CNBC that President Donald Trump’s 25% tariffs on Mexican imports set to take effect Tuesday could force the company and other grocers to increase prices on produce such as bananas, strawberries and avocados in the coming days.
Fourth Quarter
Target’s net income totaled $1.10 billion, or $2.41 per share, for the quarter ended Feb. 1, compared with $1.38 billion, or $2.98 per share, in the year-ago period. Analysts had expected earners per share of $2.26. (There was an extra week in the year-ago period.)
Net sales fell 3.1% to $30.92 billion but were ahead of expectations of $30.82 billion. Comparable sales rose 1.5%, reflecting strong traffic and digital performance, the company said. Apparel and hardline comp sales increased by nearly 4%.
Digital comparable sales grew 8.7% during the quarter. Same-day delivery powered by Target Circle 360 grew more than 25% compared to last year.
In the earnings statement, Target CEO Brian Cornell said that the company’s fourth-quarter results were led by strong performance in beauty, apparel, entertainment, sporting goods and toys.
“As we look ahead, our continued investments in digital capabilities, stores and supply chain — combined with a focus on newness, value, speed and reliability — will further differentiate our one-of-a-kind physical and digital shopping experience,” he said.
The retailer recently announced two big new partnerships, including a collaboration with Champion on a 500-piece line of activewear, accessories and sporting goods for adults and kids. It also will open in-store shops offering eyewear as well as eye exams through a partnership with Warby Parker.
Target said it saw record performance around Valentines Day, but its topline performance for the month was soft as uncharacteristically cold weather across the U.S. affected apparel sales, and declining consumer confidence impacted its discretionary assortment overall
“Looking ahead, we expect to see a moderation in this trend as apparel sales respond to warmer weather around the country, and consumers turn to Target for upcoming seasonal moments such as the Easter holiday,” said Target CFO Jim Lee. “We will continue to monitor these trends and will remain appropriately cautious with our expectations for the year ahead.”
For its current fiscal year, Target expects earnings per share to range from $8.80 and $9.80, compared to analysts estimates of $9.31. Net sales are expected to grow around 1%, less than analysts expected, reflecting comparable sales growth in a range around flat.
