Target might have reported fourth quarter losses in some major financial categories, but the Minneapolis-based retailer said it believes it’s on the verge of a turning point.
“We’ll be talking about our roadmap for growth, getting Target back to being a growth company, from a comparable sales point, from a traffic standpoint, and from a share standpoint,” Target Chairman and CEO Brian Cornell told Yahoo Finance before the company’s fourth quarter earnings call on Tuesday.
Indeed, Target had its setbacks during the last few weeks of 2023, as comparable sales dropped 4.4% year over year and store comparable sales declined 5.4%.
However, there were some major wins. Net sales were up 1.7% year over year to $31.9 billion (beating estimates of $31.30 billion) and Target’s gross profit margin increased 25.6% (beating estimates of 25%).
Traffic was down 1.7% compared to Q4 2022, but more shoppers moved through the doors vs. the previous quarter when it was down 4.1% year over year. However, both the number of transactions and average check size took a hit in the fourth quarter.
Wall Street responded well to the earnings, as Target shares were up 8.5% following the earnings report.
“Our team efforts changed the momentum of our business, further improving our sales and traffic trends in the fourth quarter while driving profitability well ahead of expectations,” said Cornell.
In 2024, Target is hoping to gain traction from its paid loyalty program. Target Circle is the retailer’s current loyalty program which offers deals and rewards for purchases, and the paid plan would up the level of special offers for a fee similar to Amazon Prime and Walmart+. It also could involve Shipt, which is the grocery delivery business Target purchased back in 2017.
Still, the retailer is projecting a drop in first quarter comparable sales, from 3% to 5%.
Cornell told Yahoo Finance that the plan in 2024 was to open new stores, remodel existing locations and add to its private label brand Dealworthy. Launched earlier this year, Dealworthy has a line of around 400 products.
For fiscal year 2023, Target was able to cut $500 million in expenses. The goal is $2 billion.
Also, operating income grew by nearly $2 billion (5.3%) compared to 2022 and capital expenditures were $4.8 billion.
The company’s operating income margin rate of 5.3% was almost two percentage points higher than in 2022. Also, cash from operations more than doubled from $4 billion in 2022 to $8.6 billion in 2023.
Target also opened 21 new stores last year, remodeled 170 locations, and powered up four new supply chain facilities, including its first Target Last Mile Delivery extension at an existing location.