It’s easy to overlook Q4 results compared to everything else that’s going on in the markets. Traders were spending more time focusing on Russia and Ukraine, soaring oil and gas prices, as well as commodities like gold and silver. All of these were far more newsworthy, but Target (NYSE: TGT) saw a surprise surge in stock price that went unnoticed by many investors. Shares shot up after the retailer reported a fantastic fourth quarter.
Sales at the Minneapolis-based retailer grew by more than 8.9% compared to a year ago. Digital sales were also up by 9.2%. Overall, revenues grew to over $106 billion, a massive spike from the $77.1 billion reported two years ago, just before the pandemic broke out.
Unlike many other retailers, these strong financial figures have helped offset rising transportation and supply chain costs. Overall earnings were up as well by 12%, hitting $1.54 billion for the quarter.
“Consumers are still worried about Covid, but they are looking for that touch of normal in their lives,” Target Chief Executive Brian Cornell told analysts Tuesday in a statement.
In response to rising inflation, the company said it wants to keep prices lower than competitors to help keep attracting customers while other retailers respond with price hikes. Target’s CFO, Michael Fiddelke, said that price is the last option for the company to combat costs, with other options still available.
Target also reported that it’s raising its minimum wage from $15 to as high as $24 per hour in some cases. Considering many big companies are dealing with labor shortages, it’s not surprising Target’s making this decision. Companies like Amazon have offered incredible employee benefits, even to minimum wage workers, just to encourage them to stay.
Shares of Target were up over 12.6% on the news. Over the past year, Target has returend over 26.3%. Most analysts covering the stock remain pretty optimistic about the retailers future. Unlike Walmart and a few other examples, most other retailers haven’t seen the same revenue growth that Target has witnessed, something which bodes well for Target’s future.
What’s going on in Ukraine isn’t expected to impact Target in the slightest. Of all the S&P 500 companies, roughly 1% of their income comes from Ukraine, meaning most big U.S. businesses should be unaffected no matter what happens overseas. The same can not be said for European retailers and businesses, whom are much more connected with Ukrainian and Russian markets.
Target Company Profile
With 1,897 stores (as of the end of fiscal 2020), Target is a leading American general merchandise retailer, offering a variety of products across several categories, including beauty and household essentials (26% of fiscal 2020 sales), food and beverage (20%), home furnishings and décor (20%), hardlines (18%), and apparel and accessories (16%). Most of Target’s stores are large, averaging nearly 130,000 square feet. The company has a significant e-commerce presence, deriving around 18% of sales from the channel (up from about 9% in fiscal 2019, before the pandemic). In addition to its namesake stores, Target owns Shipt, an online same-day delivery platform. After it exited Canada in 2015, virtually all of Target’s revenue is generated from the United States. – Warrior Trading News
