Target (TGT) posted better-than-expected holiday sales due to improved sales across all product categories. Sales were driven by a strong e-commerce performance and consumer-friendly initiatives, including value pricing, enhanced delivery options for online orders, expanded offerings, and additional store services.
Buoyed by its strong holiday performance, the company raised its sales and EPS (earnings per share) guidance for fiscal 4Q17 and fiscal 2017. It now expects sales to continue to improve in fiscal 2018, and it projects its bottom line to stabilize despite pressure on margins from investments in growth initiatives.
The benefits from the recent tax reform legislation are further expected to boost the company’s earnings and provide enough room for it to continue to pursue growth measures and enhance shareholder returns through share repurchases and dividends. Target remains on track to open 30 small-format stores and accelerate its pace of remodeling existing traditional stores. That could help drive its top-line growth rate in fiscal 2018 as these stores generate higher sales and productivity.
Target expects to continue to strengthen its delivery options for online orders by rolling out same-day delivery for most of its stores. It also expects its recently launched drive-up service to enhance convenience for shoppers.
Target stock showing strong recovery
Target stock rose 3% on January 9, 2018, following better-than-expected holiday sales and an upbeat outlook. The stock remained pressured in the first half of fiscal 2017 due to sluggish sales and declining profit margins. However, as you can see in the above graph, Target stock has recovered strongly since then, rising 35.4% in the past six months. It outperformed its peers for that period, with Walmart (WMT) and Costco (COST) stock rising 33.3% and 20.9%, respectively. Tthe S&P 500 Index (SPX) rose 13.4% in the past six months.
In the next part of this series, we’ll look at the company’s holiday sales numbers.