Target’s Q4 Sales Reach $31.9 Billion, Exceeds Market Expectations for EPS by 24.1%

Target has met market expectations for the fifth consecutive quarter.

Target’s Q4 sales for 2023 (November 2023 – January 2024) increased by 1.7% compared to the previous year, reaching $31.9 billion, and operating profit increased by 60.9% to $1.9 billion. Non-GAAP EPS increased by 57.7% to $2.98, meeting the market expectations of sales and exceeding market expectations of EPS by 24.1%.

Same-store Store Sales Growth for the fourth quarter was recorded -by 4.4%, and online sales decreased by 0.7% compared to last year. Unfortunately, the same-store sales growth is at a minus. Still, it’s very optimistic that the decline in non-essential materials sales is slowing down, as mentioned in the earnings report.

Since the second half of 2022, Target has been reporting inventory losses due to an increase in organized retail crime in its stores. The rising prices in the United States and the slow economic recovery have increased organized retail crime.

Kim Myung Ju, a researcher at Korea Investment & Securities, explained, “The reason why there were more theft issues at Target compared to Walmart or Costco is because the proportion of food sales is low compared to competitors, while the proportion of easily resalable items such as electronics is high.”

However, the company’s strong response has prevented the increase in crime frequency and damage, which is positive. As a result, the Q4 GP margin improved significantly to 25.6% compared to 22.7% in the same period last year.

Researcher Kim Myung Ju said, “I believe the worst is behind us,” and predicted a stable share price trend.

Target, which showed stable sales growth and a good share price trend during the COVID-19 period, experienced a decrease in sales and a significant drop in the share price due to inflation that came with reopening. Target’s customers have been decreasing continuously from the second quarter of 2023 to the fourth quarter.

Target plans to launch a new membership called Target Circle 360 next month to recover customer numbers.

Researcher Kim Myung Ju said, “Target’s products were priced higher than Costco and Walmart, which was one of the factors that led to customer churn,” and added, “Target is continuously launching PB products with high price competitiveness to solve this.”

As Target’s performance improves, valuation attractiveness is highlighted, and the share price is expected to recover steadily.