NEW YORK (AP) — Target Corp. reported that fourth-quarter earnings fell 5.2 percent due to sluggish holiday sales.
But the discounter, which said Thursday that its business has rebounded since then, offered a full-year profit outlook that was above Wall Street estimates.
The holiday season turned out to be fiercely competitive with stores offering deep discounts to get cost-conscious shoppers to buy. But Target's cutting wasn't as aggressive as rivals because it chose give up some sales in order to hold onto profit margins.
The company, based in Minneapolis, said revenue rose 3.3 percent to $20.94 billion, up from the $21.23 billion analysts polled by FactSet had expected. Revenue at stores opened at least a year — an indicator of a retailer's health — rose 2.2 percent in the fourth quarter. Profit margins, meanwhile, slipped to 28.4 from 28.7 percent in the year-ago period.
"We're pleased with the pace of our sales since the holiday season," said CEO Gregg Steinhafel on Thursday during a conference call with investors. "Yet, we expect we'll continue to see mixed signals in the economy going forward."
The company earned $981 million, or $1.45 per share, in the three months ended Jan. 28. That compares with $1.04 billion, or $1.45 per share, in the year-ago period. Analysts had expected $1.40 per share.
Target became a discount-store darling when it began offering stylish clothes and trendy decor under the same roof where shoppers could find toothpaste and cereal. Yet sales growth has been uneven since the Great Recession. Shoppers are looking elsewhere for lower prices. And rivals are copying its 12-year-old formula of partnering with designers.
Like many of its bricks-and-mortar rivals, Target also faces competition from online rivals like Amazon.com, which can offer lower prices and better selection because they don't have the same overhead costs. And shoppers armed with smartphones often are comparing Target prices with online competitors in the stores.