The mass merchandiser is banking on same-day services, product launches and a new membership program to boost spending at its stores.
Target plans to launch a membership feature called Target Circle 360 next month, which would offer shoppers unlimited same-day delivery, CEO Brian Cornell said on an earnings call.
Target reported adjusted earnings of $2.98 per share in the fourth quarter, compared to $1.89 per share in the same period a year earlier. Analysts on average expected $2.42 per share, according to LSEG estimates.
Total comparable sales in the November to January period fell 4.4% compared with the 4.6% decline analysts were expecting, in part due to a sales recovery on Target.com. Online sales fell 0.7% during the fourth quarter, an improvement from the 6% decline in the previous quarter.
Shoppers also responded to same-day pickup services, such as Drive-up, which made up more than 10% of total sales in the quarter, the company said.
Over the next decade, Target expects to open more than 300 U.S. stores and remodel most of its 2,000 existing ones, the CEO added.
CONSISTENT RESULTS
"(The) biggest takeaway is now back-to-back strong quarters, which is exactly what the market wants to see out of Target - consistency, which is an adjective that has been elusive for the company over the past 2-3 years," said Dave Wagner, portfolio manager at Aptus Capital Advisors.
Target Circle 360 program will be launched at a special membership price of $49 for five weeks starting April 7, allowing shoppers same-day delivery for orders over $35, Target said. The minimum order threshold was on par with Walmart's Walmart Plus program.
The new loyalty program, along with Target's focus on rolling out new products and services would help reignite sales, traffic and market share gains in 2024, Cornell added.
Target has already introduced "dealworthy", a new line of 400 products, stretching from apparel to beauty and electronics at prices starting under $1.
"We spent most of last year, watching consumers shift their consumption patterns towards services versus goods. That consumption pattern seems to be normalizing back to a healthy balance of both goods and services this year," said Art Hogan, chief market strategist at B Riley Wealth.
Target introduced its earnings outlook for 2024 of adjusted earnings between $8.60 to $9.60 per share. The midpoint of that range was largely in line with analysts' expectations of $9.14 per share, according to LSEG data.
Annual comparable sales are expected to be in a range of flat to up 2% this year, compared to analysts' average expectations of a 0.86% rise.
Gross margins in the fourth quarter ended Feb. 3 rose to 25.6%, from 22.7% a year earlier, aided by lower freight and supply-chain costs, healthy inventory and lower markdowns.
