The discount chain said on Tuesday that comparable sales, a gauge that strips out the impact of new and recently closed stores, rose 3.4 percent in November and December, well above its own forecasts and Wall Street’s expectations. Target also lifted its full year profit forecast and said it expects sales growth to continue in the new fiscal year that starts in February. Crucially, Target continued to get more customers into its stores.
The news sent Target shares up 4 percent in premarket trading, continuing the tear they’ve been on since July.
While Target is benefitting from a “rising tide lifting all boats” phenomenon that has seen many other chains, including Kohl’s and J.C. Penney post good holiday numbers, the Christmas period results are providing some validation to Target’s expensive plan to improve stores, delivery logistics, and customer service to better fight Wal-Mart and Amazon.com, among others.
Last February, Target investors were spooked by the chain’s $7bn multi-year project, which included plans to remodel hundreds of stores and continue the roll-out of its successful small format urban stores, as well as to speed up fixes to its supply chain. Wall Street’s mood was further soured in November, when the company gave a profit forecast below analyst projections.
On Tuesday, however Target forecast fourth-quarter adjusted earnings of $1.30 to $1.40 per share, compared with the previous forecast of $1.05 to $1.25.
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