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MINNEAPOLIS — Target Corp. executives entered the 2012 fiscal year upbeat despite an intensely competitive holiday season that restrained fourth-quarter sales growth.
Target Corp. executives entered the 2012 fiscal year upbeat despite an intensely competitive holiday season that restrained fourth-quarter sales growth.
Net earnings decreased 5.2% to $981 million, or $1.45 per diluted share in the final quarter. That was still enough to beat the consensus estimate of $1.40 among analysts surveyed by FactSet. Full-year net income edged up 0.3% to $2.93 billion, or $4.28 per diluted share.
Retail sales for the quarter gained 3.3% to $20.94 billion, driven by a 2.2% increase in comparable-store sales that fell well short of management’s goal. Full-year comparable-store sales, though, rose 3% — the strongest annual performance since 2007 — and helped drive a 4.1% increase in sales for the 12 months to $68.47 billion.
"For the fourth quarter, our comparable-store sales increased 2.2%, more than a percentage point below our expectations as we entered the quarter," said chairman, president and chief executive officer Gregg Steinhafel during a conference call with analysts. "This shortfall was concentrated in the peak of the holiday season, as promotional activity throughout retail was exceptionally intense, and we chose to maintain an appropriate balance between driving sales and profitability."
After the holidays, Steinhafel added, sales resumed their stronger pre-holiday pace and he said that momentum has been building, particularly in discretionary categories. According to executive vice president of merchandising Kathee Tesija, grocery achieved double-digit comparable-store sales increases during the fourth quarter, aided by additional sales space acquired through the retailer’s PFresh remodel program. Among discretionary categories, beauty and apparel were the top performers both in the fourth quarter and for the year.
Looking ahead, Steinhafel predicted a slow and uncertain economic recovery, but added that management is pleased with the pickup in sales since the holidays. "We expect we’ll continue to see mixed signals in the economy going forward," he said. "Yet, even our base-case assumption of a continued slow and uneven recovery would allow us to achieve our long-term financial goals of $100 billion or more in sales and $8 or more in earnings per share by 2017."
For the current 2012 fiscal year, Target is forecasting earnings of $4.55 to $4.75 per diluted share, which is well ahead of the $4.27 consensus among analysts.
On the expansion front, Target expects to open 15 to 20 new stores, net of relocations and closures. That figure includes five City Target stores, which will begin opening in July. "We plan to take time to learn from these stores before we determine the appropriate pace of investment and number of additional City Target stores we will open over the next few years," said Steinhafel. "In addition, we’ll apply what we learn in these pilot stores across the chain in our larger U.S. stores and in Canada."
Having remodeled its higher-volume locations throughout the chain, Target is scaling back the pace of its PFresh remodeling program this year, with about 230 stores targeted in comparison with more than 400 in fiscal 2011.
