Target Corporation (TGT.US) Q4 earnings exceed expectations but forecasts only a slight increase in sales for this year, warning that profits will face significant pressure.

Before the market opened on Tuesday, Target Corporation (TGT.US) announced its fourth quarter performance for 2024. The financial report shows that Target Corporation's Q4 net sales decreased by 3.1% year-on-year to $30.915 billion, better than the analyst's average expectation of $30.84 billion. Net profit was $1.103 billion, down 20.2% year-on-year; adjusted earnings per share were $2.41, better than the analyst's average expectation of $2.26. In the fourth quarter, same-store sales, including e-commerce, increased by 1.5%, better than the analyst's average expectation of 1.3%, and achieved growth for the third consecutive quarter. Foot traffic increased, and sales of products such as clothing and toys also increased. However, same-store sales at physical stores declined slightly. The profit margin of Target Corporation in the fourth quarter was affected by discounted online orders, as well as higher fulfillment and supply chain costs, but the growth of emerging businesses such as advertising helped offset this pressure. Despite better-than-expected fourth-quarter performance, Target Corporation's outlook for 2025 is worrisome. The company expects same-store sales in 2025 to remain relatively flat, which is below the analyst's average expectation; it expects net sales for the year to grow by about 1%, also below the analyst's average expectation of 2.4% growth. The company expects adjusted earnings per share for the year to be between $8.80 and $9.80, with a forecasted median of $9.30, which is generally in line with analysts' average expectations. Target Corporation also warned that profits will face "significant" pressure in the coming months due to soft February sales and uncertainties surrounding consumer confidence and tariffs. The company stated that soft February sales were due to cold weather affecting clothing sales and decreased consumer confidence affecting non-essential purchases. The company expects these trends to moderate, but will remain "cautious" throughout the year. The sales forecast for 2025 from Target Corporation is not good news for the struggling large retailer trying to break free from long-term stagnation. In the past two years, Target Corporation has been trying to achieve stable growth in the cautious consumer spending environment. To gain ground, Target Corporation lowered prices, offered special discounts, and refreshed product offerings on shelves, but its performance has not rebounded. In comparison, competitors Walmart Inc. (WMT.US), Costco Wholesale Corp (COST.US), etc., have shown growth. Similar to retailers such as Walmart Inc. and Home Depot, Inc. (HD.US), Target Corporation announced relatively healthy fourth-quarter performance, but remains cautious about the outlook for 2025. Top officials of these companies are trying to interpret macroeconomic factors affecting their business - President Trump's tariff policy could disrupt global supply chains and raise consumer prices. In addition, U.S. inflation has not yet fallen to the Federal Reserve's target level of 2%, and factors such as the largest drop in consumer confidence since 2021 are squeezing consumer spending (especially for low-income consumers).