US: Target Q4 profit down on expansion strategy
- Q4 profit edged down 2% to $961m
- Sales increased 6.8% to $22.4bn
- Gross margin declined to 27.8% from 28.4%
General merchandise retailer Target Corp has reported a decline in fourth-quarter profit after its expansion plans and markdowns of seasonal merchandise weighed on margins.
The Minneapolis-based company said net earnings slipped 2% to US$961m for the three months to 2 February, compared to $981m the same period last year.
Sales increased 6.8% to $22.4bn against $20.9bn the prior year, driven by the contribution of new stores and one additional accounting week. Comparable store sales edged up 0.4%.
Gross margin, however, declined to 27.8% from 28.4% the year before, reflecting the impact of the company's growth strategies and the impact of markdowns on its seasonal merchandise.
"We're pleased with Target's fourth quarter performance, particularly in the face of a highly promotional retail environment and continued consumer uncertainty," said Target chairman, president and CEO Gregg Steinhafel.
"Outstanding discipline and execution by our team allowed us to achieve our full-year financial and strategic goals in 2012. We believe these results position us well to deliver on significant plans in 2013, including completion of the largest store opening program in our company's history with 124 stores in Canada and additional Target and CityTarget locations in the US, investing in new processes and technology that will improve our guests' multichannel experience and closing the sale of our credit card receivables."
Over the full year, net earnings climbed 2% to $3bn from $2.93bn last year. Sales rose 5.1% to $72bn, compared to $68.5bn the prior year, while comparable store sales climbed 2.7%.
Looking forward, the company expects fiscal 2013 earnings per share to range from $4.70 to $4.90, compared to $4.52 this year. Adjusted earnings per share are forecast to be between $4.85 and $5.05, compared to $4.76 this year.
Commenting on the company's expansion into Canada, Janney Capital Markets analyst David Strasser said: "As always, there is exciting merchandising roll outs coming, and once stores start to open in Canada, we believe investors will be more confident in the company's ability to deliver on this major initiative of opening 124 stores in a new country this year."
"The company is finally embracing a multi-channel model and continues to make significant investment in technology to improve navigation, functionality and product assortment," Strasser added.
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