Business

Target profit increases as annual revenues exceed $ 100 billion

After two years of a pandemic that brought Target Corp.

TGT 9.84%

billion in sales, the retailer wants to continue to grow by creating more e-commerce stores and hubs and new business segments.

Sales rose at the Minneapolis-based retailer in the most recent quarter, aided by stronger stores during the holiday season and growth in all of its merchandise categories, including food, clothing and household items.

Comparable sales, which include sales from stores or digital channels operating for at least 12 months, rose 8.9% in the quarter ended Jan. 29 from a year earlier, the company said. Digital sales increased 9.2%.

For the full year, Target revenue reached $ 106 billion, up from $ 77.1 billion in the year ended February 1, 2020, before the pandemic overturned the global economy and consumer market patterns.

Recently, strong revenue growth has helped offset higher supply chain costs and Target payroll costs. Total earnings rose nearly 12 percent year-over-year to $ 1.54 billion, or $ 3.21 a share. Earnings excluding special items also came before Wall Street forecasts.

Other big retailers like Walmart Inc.

reported strong sales growth in the last financial year, including the holiday shopping period. These retailers have been able to make extensive use of their networks and e-commerce to address employee shortages due to the Omicron variant, supply chain jacks and rising prices.

Smaller retail chains, such as Kohl’s Corp.

KSS 2.12%

They said delays in the arrival of stocks in stores had limited sales growth and the complexities of the pandemic had led to profits in recent months.

The Covid-19 pandemic has stretched global supply chains, causing cargo delays that have led to rising costs. Some companies are now looking for long-term solutions to prepare for future supply chain crises, even if these strategies are costly. Photo illustration: Jacob Reynolds

Consumer spending remains strong even as prices rise. In January, spending increased seasonally by 2.1% year-on-month, with personal income remaining stable, the Commerce Department said. Research, however, shows an increasingly sad mood among consumers during the last phase of the pandemic combined with the effects of inflation on other developments.

“Consumers are still worried about Covid, but they are looking for that normal touch in their lives,” Target CEO Brian Cornell told analysts on Tuesday.

The financial performance during the first two years of the pandemic will be difficult for many retailers to reproduce. Target expects earnings and adjusted earnings per share to grow at a slower pace this year than 2021. Kohl’s, which also reported quarterly financial results on Tuesday, forecasts net sales in fiscal year 2022 to rise 2% to 3%, compared to an increase of almost 22%. the last year.

Another department store chain, Nordstrom Inc.,

forecast that revenue growth would slow between 5% and 7% this year, but said that as a result of improvements in its operations, it could continue to pay dividends this quarter after a nearly two-year hiatus.

Target is focusing on investing in its stores while increasing digital sales, company executives told analysts at an event in New York on Tuesday. About 19% of Target’s total sales are now digital, up from 8.8% in 2019. Most of these sales come from store inventory — store employees pack orders for home delivery or delivery to customers. in parking lots.

The company is building large sorting centers, large warehouses that use automation to quickly package same-day delivery orders near city centers such as Chicago, to expand the business faster, executives said. It also plans to expand Roundel, an in-house media outlet that works with branding and advertising agencies, to a $ 2 billion business in the coming years.

Target shares rose 9.8% in Tuesday’s trading.

Kohl’s contributes to partnerships such as the one it has with beauty retailer Sephora to increase its sales. It also plans to invest in its physical locations, including freight forwarders such as active clothing in front of stores.

The department store’s latest report also comes as it rejects criticism from activist investors. Rejected a $ 9 billion takeover bid from a consortium backed by hedge fund Starboard Value LP. The rejection drew criticism from Jonathan Duskin, managing director of Macellum Advisors GP LLC, which has about a 5% stake in the retailer and has pushed for board changes.

On Tuesday, CEO Michelle Gass dismissed criticism that the company’s board is not open to opportunities to boost shareholder value. Kohl’s also said it would double its quarterly dividend and buy back at least $ 1 billion of its stock this year, which Gus said in an interview was a testament to the company’s confidence in its strategy.

“While we have tremendous confidence in our future, we are testing and evaluating this plan in relation to other alternatives,” he said.

Kohl shares rose 2.1%.

In response to inflation, Target aims to keep prices lower than competitors this year, executives said. “We have a lot of leverage to fight costs and the price is what we pull last, not first,” said Michael Fiddelke, the company’s chief financial officer.

How do the biggest companies perform?

The company expects labor market and supply chain bottlenecks to continue this year and monitors consumer spending without the benefit of government incentives, he said. On Monday, Target said it would offer $ 15 to $ 24 an hour minimum wage and expand the pool of employees eligible for the company’s health benefits.

Target is also monitoring the situation in Ukraine to determine whether there will be a wider impact on the supply chain, Cornell, the CEO, told reporters. Although the company does not supply products directly from Ukraine, executives said the company will use its scale to be flexible in dealing with any changes.

I write to you Sarah Nassauer at sarah.nassauer@wsj.com and Charity L. Scott at Charity.Scott@wsj.com

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Target profit increases as annual revenues exceed $ 100 billion

Source link Target profit increases as annual revenues exceed $ 100 billion

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