By Paul Ziobro and Chelsey Dulaney
Target Corp. posted its best sales growth in nearly three years,
a sign shoppers are responding to changes under new Chief Executive
Brian Cornell such as free holiday shipping and a greater focus on
apparel and home goods.
Sales excluding newly opened and closed stores rose 3.8% for the
fourth-quarter, ahead of Target's projection for 3% growth, and
profit beat the forecast Target gave a little over a month ago.
The company is not yet declaring victory.
"We're still in the very early stages," Target Chief Financial
Officer John Mulligan said Wednesday on a conference call. Even
with a 3.2% increase in transactions in the fourth-quarter, traffic
is still down over a two-year period.
Target is trying to dig itself out of a hole left from several
years of disappointing results, when the retailer failed to
distinguish itself with enough hip products and found itself trying
to stand out with lower prices on commodities goods like toilet
paper and laundry detergent. The long string of weakness--capped by
the disastrous expansion into Canada and the 2013 data
breach--caused executives to rethink Target's purpose and forced
the removal of their prior CEO Gregg Steinhafel.
Mr. Cornell, a former PepsiCo executive, took the top job at
Target in August, and has since been engineering a turnaround at
the retailer. His strategy places more focus on signature
categories like fashion, furniture, baby goods and beauty products,
and he has also brought renewed attention to digital sales and
opening smaller format stores.
Target's results--like those of rival Wal-Mart Stores Inc.--were
helped by improving labor market and lower gas prices which made
shoppers more willing to travel to big box stores and spend. Target
had an easy base of comparison. A year ago, shoppers shunned its
stores following the revelation that hackers stole 40 million
credit card numbers and another 70 million personal records.
Mr. Cornell is planning to boost investment to drive growth. Top
Target executives plan to outline that strategy at an investor
event next week. Mr. Mulligan said that Target will work hard to
offset those costs by cutting excess expenses.
"There is a lot of investment to be done," Mr. Mulligan said.
"We feel that we can pay for those investments with cost
takeouts."
Target has eliminated one drain on its capital and attention.
The retailer last month said it would liquidate its Canadian
business, ending its first international experiment. Target lost
more than $2.5 billion in two years in Canada and booked a $5
billion pretax charge, leading to a reported loss for the
period.
The Canadian exit cost Target in its results. For the quarter
ended Jan. 31, Target posted a loss of $2.64 billion, compared with
a profit of $520 million, a year earlier. Excluding the Canadian
exit and other one-time items, earnings from continuing operations
were $1.50 a share.
Net sales grew 4.1% to $21.8 billion, just topping the $21.6
billion expected by analysts.
Write to Paul Ziobro at Paul.Ziobro@wsj.com and Chelsey Dulaney
at Chelsey.Dulaney@wsj.com
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