What happened
Shares of Target (NYSE: TGT) jumped on Tuesday following the retailer’s fourth-quarter report. Target beat analyst estimates across the board, posting solid comparable sales growth and online sales growth. The company also provided 2019 earnings guidance that came in ahead of expectations. The stock was up about 5% at 3:30 p.m. EST.
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So what
Target reported fourth-quarter revenue of $22.7 billion, flat year over year and $70 million above the average analyst estimate. The fourth quarter of 2017 had an extra week, which reduced the revenue growth rate.
Comparable sales surged 5.3%, with stores contributing 2.9% of that growth and digital sales contributing 2.4% of that growth. Digital sales grew by 31% year over year, and they accounted for more than 10% of Target’s total revenue.
Non-GAAP earnings per share came in at $1.53, up from $1.36 in the prior-year period and $0.01 better than analysts were expecting. The company expects to produce non-GAAP EPS between $5.75 and $6.05 in 2019, higher than the average analyst estimate of $5.61.
Now what
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Target’s strategy of rolling out exclusive brands, investing in online initiatives like free two-day shipping and curbside pickup, and lowering prices is paying off. The retailer is proving that it can effectively compete against Walmart and Amazon.
Target won’t get the same year-over-year earnings benefit this year from a lower tax rate, but low- to mid-single-digit comparable sales growth and continued share buybacks will help the company hit its earnings guidance.
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