Target beats Q4 earnings estimates; revenues fall short

Target Corporation (NYSE: TGT) beat market expectations for earnings in the fourth quarter of 2019 but revenues came up shy, causing the stock to fall over 2% in premarket hours on Tuesday.

Total revenue inched up 1.8% year-over-year to $23.4 billion but fell short of forecasts of $23.5 billion. Comparable sales grew 1.5%.  

GAAP net income grew 4.4% to $834 million and GAAP EPS rose 6.9% to $1.63. Adjusted EPS improved by 10.6% to $1.69, beating estimates of $1.65.  

During the quarter, comparable digital sales grew 20%. Target’s same-day fulfilment services, which include Drive Up and Shipt, accounted for over 80% of comparable digital sales growth.

The company’s efforts to optimize costs, pricing, and assortment, coupled with a favorable category sales mix, helped drive an improvement in gross margin rate to 26.3% from 25.7% in the same period last year.

For the first quarter of 2020, Target expects a low single digit increase in comparable sales. GAAP EPS from continuing operations and adjusted EPS are both expected to come in the range of $1.55-1.75.

For the full year of 2020, the company expects a low single digit increase in comparable sales. GAAP EPS from continuing operations and adjusted EPS are estimated to be $6.70-7.00.

Also read: JD.com Q4 2019 Earnings Report

In January, Target reported holiday sales that came below its expectations due to weakness in key seasonal categories such as toys and electronics. These categories account for a significant portion of sales during the holidays, their impact on sales growth tends to be larger versus the rest of the year.

The company saw strength and market share gains in the apparel, beauty and essentials, and food and beverage categories during the holidays. Comparable sales in the November/December period grew 1.4%, driven by traffic and an increase in average ticket. Comparable digital sales grew 19% in the period.

Target’s shares have fallen 14% since the beginning of the year. Last week, its competitor Macy’s (NYSE: M) reported fourth quarter 2019 earnings results, beating both sales and earnings estimates.

Get access to timely and accurate verbatim transcripts that are published within hours of the event.