Target Defies Retail Gloom With Profit Beat, Margin Gains

Target Corporation (NYSE:TGT) shares rose in premarket trading Tuesday after the retailer delivered a stronger-than-expected profit report.

Investors looked past a slight sales dip as Target showed steadier margins. Notably, food and beverage, beauty and toys posted net sales growth during the quarter, while essentials and home showed improved trends compared with the third quarter.

Key Metrics

The company reported fourth-quarter adjusted earnings per share of $2.44, beating the analyst consensus estimate of $2.15. Quarterly sales of $30.453 billion (down 1.5% year over year) missed the Street view of $30.512 billion.

Fourth-quarter comparable sales decreased 2.5%, reflecting a comparable-store sales decline of 3.9% and a comparable-digital sales increase of 1.9%.

In the quarter under review, apparel & accessories sales totaled $4.100 billion, lower than $4.344 billion a year ago. Beauty sales increased to $3.484 billion from $3.444 billion a year ago. Sales in the food & beverage unit totaled $6.638 billion, compared with $6.520 billion.

Advertising revenue was $295 billion, compared with $190 billion.

Quarterly adjusted operating income was $1.5 billion, slightly above last year. Adjusted operating income margin rate was 4.8% in the fourth quarter, compared with 4.7% a year ago.

Gross margin rate was 26.6%, compared with 26.2% a year ago, reflecting lower inventory shrink, lower supply chain and digital fulfillment costs, and growth in advertising and other revenues.

Target exited the quarter with cash and equivalents worth $5.488 billion.

Outlook

The firm is looking for 2026 adjusted EPS of $7.50-$8.50, versus an analyst estimate of $7.68. It projects sales of $106.876 billion, versus the analyst estimate of $106.672 billion.

Target sees fiscal 2026 GAAP EPS of $7.50 to $8.50 versus the $7.76 estimate.

For the first quarter, the company’s adjusted earnings per share is expected to be more than $1.30 versus $1.50 estimate, while GAAP earnings per share is expected to be more than $1.30 versus $1.53 estimate.

TGT Price Action: Target shares were up 3.47% at $117.10 during premarket trading on Tuesday.

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