Target Corp. stock soared nearly 10% in Tuesday trading after the retailer reported profit that hit a record, and gave guidance that looks ahead to even more growth.
reported earnings per share of $3.21, up from $2.73 the previous year. Adjusted EPS of $3.19 blew past Street expectations of $2.85.
Revenue of $31.00 billion was up from $28.34 billion last year but missed the FactSet consensus for $31.32 billion.
For fiscal 2022, the company is guiding for low- to mid-single digit revenue growth and high-single digit adjusted EPS growth. The FactSet consensus is for revenue of $108.64 billion, implying 2.4% growth, and EPS of $13.20, suggesting a 2.7% decline.
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Target noted that the fourth-quarter results came alongside a number of investments.
On Tuesday, the company announced that it will raise the starting wage to up to $24 and expand health benefits, a $300 million investment.
The company is also developing its fulfillment capabilities with five more sortation centers coming by the end of next month, spanning from Dallas to Philadelphia, and another five planned for later this year.
“With digital fulfillment growing exponentially and in-store traffic continuing to rise, our stores are supporting more and more volume,” said John Mulligan, chief operating officer, on the earnings call on Tuesday. The earnings call was coupled with the company’s investor day event.
Traffic was up 12.3% for 2021.
“In the last five years the average stores added $15 million in sales, which means $40 million stores have become $55 million to $60 million stores and growing. And as our stores become more productive, they naturally gain efficiencies, including significant cost leverage and lower clearance markdown rates, so as they contribute more to our top line, they further protect our bottom line.”
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The retailer has also been able to drive in-store pickup through services like Drive Up and Order Pickup. Nearly all of the company’s fourth-quarter sales, more than 95%, were handled by stores.
And there was a 45% increase in same-day services, which also includes Shipt.
“Target has made itself a destination that consumers visit both out of necessity and out of choice,” wrote Neil Saunders, managing director at GlobalData.
“It is simultaneously convenient and inspiring, both of which were particularly important attributes over this holiday period.”
Cowen maintained its outperform stock rating and $265 price target.
“We believe broad-based category strength, retention of new customers, and store-as-a-hub execution drove performance,” analysts wrote.
“In our view, higher store productivity combined with omnichannel and same-day pickup options position Target well to drive ongoing revenue growth, and maintain margins.”
Target stock has rallied 17.8% over the past year while the S&P 500 index
is up 10%.