Target has become the darling of the media since it release its holiday sales results. According to Bloomberg, Target has slid into the winners’ circle after the retailer raised its revenue and profit guidance for the complete year thanks to a 3.4% increase in sales during the recently ended holiday season.
The holiday season that just closed was by far the best that the US has seen in the last 10 years, according to Bloomberg. This is because of low unemploymeent rates, rising consumer confidence as well as a huge demand for best sellers like L.O.L. Surprise! toys and voice-enabled home assistance devices.
According to Fortune, Target’s strategy of investing $7 billion in re-structuring its business has really paid off. When Target made the investment in February last year, analysts and investors were worried about the outcome of such a huge spend. The retail brick-and-mortar segment was in a slump, with stores struggling to stay afloat.
Despite all its naysayers, the company went ahead and invested in remodeling hundreds of its stores. Target also continued to roll out more of its small-format urban stores. The company further invested in improving its customer service experience as well as streamlining and speeding up delivery logistics. In fact, Target bought Shipt to really beef up its same-day delivery logistics.
The company also announced that it was going to lower prices for the holiday season and hire an extra 100,000 temporary workers for that time.
This was done to make the store more able to compete with giants such as Wal-Mart and Amazon Inc.
Target paid a price for such a huge investment as investors and analysts panicked and gave the company a lowered guidance for the holiday season. The retailer’s shares also dropped by 5% in this time.
However, today, the story is a completely different one. Over and above the fact that the retailer’s sales outstripped last year’s targets, the company is also expecting this growth to continue into the new fiscal year that will begin in February. Target also got a boost in sales thanks to the great reception its new lines received, especially its children’s line Cat & Jack. Thanks to all the upgrades last year, Target was able to integrate online sales and in-store sales seamlessly to such an extent that about 70% of online sales were in part filled by stores. Chief Executive Brian Cornell wrote in a blog post that the company’s holiday performance reflected the investments they have made in their team by increasing staffing as well as workers’ wages, and improving customer service and product knowledge and expertise through training programs.
The company forecast that its fourth quarter earnings were going to be between $1.30 and $1.40 per share, vis-à-vis the previous estimated target of $1.05 to $1.25. Full-year earnings per share will also go up to between $4.64 and $4.74, which could push shares up by 4% to $69.88.