Target reports Q4, full-year results
Target’s strong performance in beauty, apparel, entertainment, sporting goods and toys helped boost sales and profitability in the fourth quarter, said Brian Cornell, chair and CEO, in reporting the company's Q4 and full year results.
"Our team grew traffic and delivered better-than-expected sales and profitability in our biggest quarter of the year," said Brian Cornell, chair and CEO of Target. "Results were led by strong performance in beauty, apparel, entertainment, sporting goods and toys. As we look ahead, our continued investments in digital capabilities, stores and supply chain—combined with a focus on newness, value, speed and reliability—will further differentiate our one-of-a-kind physical and digital shopping experience. Consumers continue to be drawn to the everyday discovery and delight that only Target can deliver, and we're committed to leveraging our strategy, scale and unique position in retail to build on this distinct competitive advantage and drive long-term profitable growth."
[Read more: Target, locked]
In light of ongoing consumer uncertainty and a small decline in February net sales, combined with tariff uncertainty and the expected timing of certain costs within the fiscal year, the company said it expects to see meaningful year-over-year profit pressure in its first quarter relative to the remainder of the year.
“During February, we saw record performance around Valentines Day. However, our topline performance for the month was soft, as uncharacteristically cold weather across the U.S. affected apparel sales, and declining consumer confidence impacted our discretionary assortment overall,” said Jim Lee, chief financial officer. “Looking ahead, we expect to see a moderation in this trend as apparel sales respond to warmer weather around the country, and consumers turn to Target for upcoming seasonal moments such as the Easter holiday. We will continue to monitor these trends and will remain appropriately cautious with our expectations for the year ahead.”
Target’s total comparable sales increased 1.5% in the fourth quarter, reflecting a comparable store sales decline of 0.5% and a comparable digital sales increase of 8.7%. Net sales of $30.9 billion were 3.1% lower in the fourth quarter compared with 2023, which included an additional week. Operating income was $1.5 billion in fourth quarter 2024, a decrease of 21.3% from $1.9 billion in 2023.
Full-year net sales decreased 0.8% to $106.6 billion from $107.4 billion last year, reflecting a 0.1% increase in comparable sales as well as the benefit of sales from new stores and growth in non-merchandise revenues, offset by the impact of one fewer week of sales in 2024, the company said.
The retailer’s fourth quarter operating income margin rate was 4.7% in 2024 compared with 5.8% in 2023. Fourth quarter gross margin rate was 26.2%, compared with 26.6% in 2023, reflecting higher digital fulfillment and supply chain costs and higher promotional and clearance markdown rates. These pressures were partially offset by the net benefit of other merchandising activities, Target said.
The company’s full-year operating income of $5.6 billion in 2024 declined 2.5% from $5.7 billion last year. Target's full-year gross margin rate was 28.2%, compared with 27.5% in 2023, reflecting product cost improvements, growth in advertising and marketplace revenues and lower book-to-physical inventory adjustments, which more than offset higher promotional and clearance markdown rates and higher digital fulfillment & supply chain costs.
[Read more: Inside Beauty: Hum Nutrition splashes onto Target shelves]
The company has the following expectations for full-year 2025:
- Net sales growth in a range around 1%, reflecting comparable sales growth in a range around flat
- A modest increase in the company's operating margin rate compared to full-year 2024
- An effective tax rate of 23 to 24%
- GAAP and Adjusted EPS of $8.80 to $9.80