Target hits on all cylinders in the fourth quarter

MINNEAPOLIS — Strong online sales, traffic growth in newly remodeled stores and expanded delivery options pushed Target beyond most expectations in the crucial fourth quarter, when retailers ring up holiday sales.

Target, which is fighting with Walmart as well as Amazon for online dominance, reported a 31 per cent spike in comparable digital sales Tuesday, which contributed 2.4 percentage points to comparable sales growth. Comparable sales, which include store and online sales, rose 5.3 per cent, better than the 5 per cent that industry analysts had expected, according to a survey by FactSet.

But it also recorded a 4.5 per cent tick higher in store traffic, where the company has dedicated billions of dollars to update and modernize. That appears to be paying off, even with the company focused so intently on e-commerce.

The company put out a better-than-expected forecast for the year, and shares rose almost 6 per cent before the opening bell Tuesday.

For the three months ended Feb. 2, Target Corp. reported $23 billion in revenue, beating the $22.92 billion forecast. It earned $799 million, or $1.52 per share. Its adjusted earnings were $1.53 per share, a penny better than Wall Street expected.

Target follows Walmart in bucking some early U.S. reports that the retail sector is in for a slowdown. Americans appear ready and willing to spend without paycheque anxiety.

Target announced in January that comparable holiday sales rose 5.7 per cent in November and December from the same period last year. The Minneapolis company is among those that have expanded their toy aisles to capitalize on the demise of Toys R Us.

Target is spending more than $7 billion through 2020 to update its stores and hopes to meld in urban areas with smaller locations. In addition to money on store improvements, it’s paying employees more, all in hopes of revitalizing its vibe and keeping shoppers coming back for an updated lineup of products.

With the arrival of Amazon, Target has expanded delivery services while capitalizing on the strength of its physical presence. Stores have become shipping hubs, speeding deliveries and customers have the option of picking up purchases curbside or choosing next-day delivery for some purchases.

Target Corp. said it expects 2019 per-share earnings of $5.75to$6.05. Even the low end of that range easily beats analyst projections of $5.61.

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