Target Corp. emerged as a winner this holiday season, boosting its turnaround plan and pressuring rival Wal-Mart Stores Inc. to match the performance.
Target’s shares jumped Tuesday morning after the company raised its full-year revenue and profit forecasts thanks to a 3.4 percent increase in holiday-period sales. That’s an acceleration from the third quarter’s pace and a turnaround from last year’s disappointing Yuletide performance.
Minneapolis-based Target operates more than 1,800 stores, including 11 in the Indianapolis area.
“We saw increased guest traffic in November and December, and strength in all five of our core merchandise categories,” CEO Brian Cornell said in a blog post on the company’s website.
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.
Target said it now sees full-year profit of $4.64 to $4.74 a share, sending the stock 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.
Target also said the tax benefit would push up 2018 earnings to a range of $5.15 to $5.45 a share. That’s well above the $4.57 average of analysts’ estimates, and came as a “real surprise” to analyst Chuck Grom of Gordon Haskett Advisors.
The retailer’s performance could have been better as new store brands suffered from “poor merchandising and display,” according to analyst Neil Saunders of GlobalData Retail.
Still, shoppers snatched up items like Threshold home decor, Keurig coffee makers and Nintendo Switch game consoles, Target said. Total gift spending on average increased 18 percent over the holidays versus the same period last year, the International Council of Shopping Centers said in a separate statement Tuesday, and two out of three shoppers visited discounters like Target.
“Give ’em credit, it was a strong holiday,” Edward Jones analyst Brian Yarbrough said. “But is this the start of a trend, or a head fake? They need three or four good quarters in a row to get more people interested.”