Target, the large-store format retailer, posted earnings which topped expectations but saw sales fall slightly short of forecasts for the fourth quarter.
The company announced a 9.4% increase in revenue to $31 bn in Q4 2021. Comparable sales missed estimates, rising only 8.9% as pandemic stimulus cheques came to an end.
Digital sales grew 9.2% in the quarter and now comprise 21.8% of total sales. For the full-year, digital sales grew 45% YoY thanks to the popularity of the retail chain’s in-store pickup, same-day delivery and curbside pickup services. That is on top of the 235% YoY growth in same-day services it racked up in fiscal 2020, as contactless shopping gained traction due to lockdown rules.
Net income increased 12% to $1.54 billion, or $3.21 per share. Excluding once-off items, the retailer earned $3.19 per share.
Target said supply chain costs rose as a result of a larger workforce and higher wages at its distribution centers. It also paid more for freight and merchandise. Despite these inflationary headwinds, the company expects better-than expected revenue growth in the low- to mid-single digits for the year ahead. And profits are projected to rise by high single digits. The company has planned capital expenditures of between $4 bn and $5 bn for fiscal 2022 and 2023.
Target’s annual revenue reached $106 billion for the full year, up nearly 36% over the past two years. This reflects the high quality of the business as well as management’s ability to navigate the pandemic-related difficulties. Target will now have to compete more than ever before as the sting of inflation sees consumers reprioritize spending in a reopening economy.