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Target jumps after brisk holiday sales help boost forecast

Bloomberg logoBloomberg 1/9/2018 Matthew Boyle

Target emerged a winner this holiday season, boosting its turnaround plan and pressuring rival Walmart to match the performance.

Target’s shares jumped more than 3 percent Tuesday after the company raised its full-year revenue and profit forecasts thanks to a 3.4 percent increase in holiday sales. That’s an acceleration from the third quarter’s pace and a turnaround from last year’s disappointing Yuletide performance.

“We saw increased guest traffic in November and December and strength in all five of our core merchandise categories,” Chief Executive Officer Brian Cornell said in a blog post on the company’s website.

a screenshot of a cell phone: Moving Target© Bloomberg Moving Target

The just-ended holiday period could be the best for U.S. retailers since the Great Recession, buoyed by low unemployment, robust consumer confidence and increased spending for hot items like L.O.L. Surprise toys and voice-enabled home assistants. Sales at Kohl’s Corp. also surged, the department-store chain said Monday, boosted by online transactions. E-commerce spending should comprise more than 11 percent of total holiday shopping, the largest portion ever, according to EMarketer.

Target’s strong holiday sales are a balm for Cornell, who’s nearly a year into a $7 billion turnaround plan that includes opening smaller urban locations, introducing more store brands and lowering prices on everyday items. Target has made several moves to upgrade its web operations to keep pace with Walmart and Amazon.com Inc., including the $550 million acquisition of startup Shipt, which will speed the rollout of same-day shipping. Online sales should grow more than 25 percent this year, the company said.

Profit Forecast

Target said it now sees full-year profit of $4.64 to $4.74 a share, sending the shares up as much as 4.5 percent to $70.23 in early trading.

The chain also raised sales and profit guidance for the fourth quarter, and said the new federal tax legislation will boost earnings between six and eight cents in the period. A lower corporate tax rate next year will also increase cash flow, which will be used for capital investments, dividends and share buybacks.

Visits to Target stores accelerated in the holiday period compared with the third quarter, according to Consumer Edge Research. The retailer this week also unveiled its latest brand, a line of denim jeans and accessories dubbed Universal Thread, part of a private-label push that could add more than $10 billion in sales, Cornell has said. Over the holidays, shoppers snatched up items like Threshold home decor, Keurig coffee makers and Nintendo Switch game consoles, Target said.


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