Target Corporation TGT reported fourth-quarter fiscal 2024 results, with the top and bottom lines surpassing the Zacks Consensus Estimate. Comparable sales growth also accelerated from the preceding quarter. Better-than-expected results were driven by a stellar performance in beauty, apparel, entertainment, sporting goods and toys. 

However, the Minneapolis-based retailer issued a cautious first-quarter fiscal 2025 view. Target anticipates significant year-over-year profit pressure in the first quarter compared to the rest of the year owing to ongoing consumer uncertainty, a slight decline in February net sales, tariff concerns and the expected timing of certain expenses throughout the fiscal year.

The company achieved record sales during Valentine’s Day in February, but overall monthly performance was subdued. Unseasonably cold weather across the United States impacted apparel sales, while weakening consumer confidence led to softer demand for discretionary items.

Target’s Quarterly Performance: Key Metrics and Insights

Target reported adjusted earnings of $2.41 per share, which beat the Zacks Consensus Estimate of $2.25 but declined from $2.98 reported in the year-ago period.

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The big-box retailer generated total revenues of $30,915 million, which came ahead of the Zacks Consensus Estimate of $30,766 million. However, the metric fell 3.1% on a year-over-year basis. We note that merchandise sales declined 3.3% to $30,428 million. 

Meanwhile, comparable sales rose 1.5% in the fourth quarter, following a 0.3% increase in the preceding quarter. The metric reflected a decline of 0.5% in comparable store sales but an increase of 8.7% in comparable digital sales.

While traffic improved by 2.1%, the average transaction amount declined by 0.6%. Target highlighted that comparable sales trends in apparel and hardlines increased by nearly four percentage points compared with the third quarter.

The gross margin contracted 40 basis points to 26.2%. This can be attributed to higher digital fulfillment and supply-chain costs as well as higher promotional and clearance markdown rates. These were partly mitigated by the net benefit of other merchandising activities. The operating margin shrunk to 4.7% from 5.8% in the corresponding period last year.

Target’s Financial Health Snapshot

This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $4,762 million, long-term debt and other borrowings of $14,304 million and shareholders’ investment of $14,666 million. During the quarter, Target paid out dividends of $513 million.

Target repurchased 3.7 million shares worth $506 million during the quarter under review. At the end of the quarter, the company had about $8.7 billion remaining under the repurchase program approved in August 2021.

A Sneak Peek Into TGT’s FY25 Outlook

Target expects net sales growth of around 1%, driven by flat comparable sales. The company also anticipates a slight improvement in its operating margin rate compared to full-year 2024, with GAAP and adjusted earnings per share projected between $8.80 and $9.80.

Shares of Target have fallen 5.4% year to date against the industry’s growth of 6.2%.

Don’t Miss These Solid Bets

Sprouts Farmers SFM, which is engaged in the retailing of fresh, natural and organic food products, currently sports a Zacks Rank #1 (Strong Buy). SFM has a trailing four-quarter earnings surprise of 15.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings implies growth of 12.1% and 21.6%, respectively, from the year-ago reported numbers.

Costco COST, which operates membership warehouses, carries a Zacks Rank #2 (Buy). COST has a trailing four-quarter earnings surprise of 2%, on average. 

The Zacks Consensus Estimate for Costco’s current financial-year sales and earnings suggests growth of around 7.5% and 11.9%, respectively, from the year-ago reported numbers.

Post Holdings POST, a consumer packaged goods holding company, currently carries a Zacks Rank #2. POST has a trailing four-quarter earnings surprise of 22.3%, on average. 

The Zacks Consensus Estimate for Post Holdings’ current financial-year sales and earnings suggests growth of 0.3% and 2.2%, respectively, from the year-ago reported numbers.

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