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Target Corp. posted a better-than-expected 55 percent increase in profits for the fourth-quarter, thanks to improved food, apparel and other nonessential product sales. Net income rose to $936 million, or $1.24 a share, from $609 million, or 81 cents a share, in the same period a year ago.
Sales in the quarter ended Jan. 30 rose nearly 4 percent to $19.7 billion, while credit card revenue declined 14 percent to $462 million. Target’s fourth-quarter same-store sales were modestly positive at 0.6 percent, outpacing Wal-Mart’s in the fourth quarter for the first time in two years.
“We’re very pleased with our fourth-quarter and full-year 2009 financial performance, which reflect substantial innovation and disciplined execution by teams across the company,” said Gregg Steinhafel, chairman, president, and CEO of Minneapolis-based Target Corp. “Fourth-quarter retail segment performance was well above our expectations due to stronger-than-expected holiday sales, combined with well-controlled inventories and disciplined expense controls. In 2010, we expect our guest traffic trends and sales of discretionary categories to benefit from broader implementation of our new merchandise initiatives as well as a continued modest recovery in the economy, and believe Target will continue to gain profitable market share.”
Target’s fourth-quarter gross margin rate increased 1.8 percentage points to 29 percent, driven by rate improvement within categories slightly offset by the impact of faster sales growth in nondiscretionary, lower-margin-rate categories. Category rate favorability was driven in part by lower levels of clearance sales, which declined more than 20 percent from the fourth quarter of 2008.
For fiscal 2009, sales increased 0.9 percent to $63.4 billion, from $62.9 billion in 2008, due to the contribution from new stores, partially offset by a 2.5 percent decline in comparable-store sales. Full-year retail segment EBIT increased 7.3 percent to $4.4 billion in 2009 from $4.1 billion in 2008.
Steinhafel said the company is working to sell more food products in its P-fresh sections in Target stores while continuing to emphasize designer exclusives such as a limited clothing lines and special selling events.
For 2010, Target forecast retail same-store sales to increase 2 percent to 4 percent.