Santa left Target (TGT) some presents last holiday season, but it may not be enough for investors.
The big box retailer announced total sales increased 2.8% year over year in November and December, with same-store sales jumping 2%. Record-high sales on Black Friday and Cyber Monday helped reverse the recent trend of lagging same-store sales growth.
According to the release, discretionary spending saw an acceleration compared to the previous quarter. Digital sales also grew 9% year over year in November and December, reflecting a “more than 30% growth in same-day delivery” from its membership model, Target Circle 360.
CEO Brian Cornell said the team delivered “better-than-expected holiday-season performance” and made “Target a destination for consumers.”
For the fourth quarter overall, the company projects same-store sales growth of roughly 1.5%, compared to previous guidance of flat growth. Wall Street had expected a 0.18% lift, per Bloomberg consensus estimates.
The company did not increase its profit outlook, which made investors cautious. Shares fell 2% in morning trading on Thursday. Telsey Advisory Group’s Joe Feldman expects promotions, loyalty programs, and higher producer costs to put pressure on profits.
Target reaffirmed the previous range of $1.85 to $2.45 for adjusted earnings per share for the fourth quarter. Wall Street expects earnings to come in at $2.19 per share.
Jefferies’ Corey Tarlowe said the company “exited the Holiday season with inventory relatively clean (even too lean in some stores, as we saw during our recent channel checks).” He added that “port strike was averted, but bear concerns remain about possible tariff exposure.”
Feldman, who has an Outperform rating on Target, likes the firm for its “fresh merchandising and digital transformation.”
Tarlowe also sees “further upside ahead” for Target. The holiday sales period “reflects the company’s value orientation, unique and differentiated assortment, and strengthening digital business.”
In October, the company announced that by the end of 2024, it will have lowered prices on over 10,000 items during the year.
In the third quarter, rival Walmart (WMT) posted adjusted earnings per share of $0.58, alongside same-store sales growth of 5.3%. Walmart has not yet unveiled its holiday results but did raise its guidance for fiscal year 2025 for the third time last quarter.
It’s expected to grow net sales by between 4.8% and 5.1%, and same-store sales are estimated to jump 3% to 4%.
