Target Triumphs With Unexpected Holiday Sales Surge but Struggles To Boost Profits

Superstore Target is optimistic about its earnings in the fiscal fourth quarter. The retailer predicts a 1.5% growth in comparable sales, which measures purchases made online and in stores open for at least 13 months. Earnings should range between $1.85 and $2.45.

Yet, Target is not so hopeful about profits. Earnings for the year will hit somewhere around $8.30 to $8.90, which is exactly in line with the retailer’s November 2024 predictions.

During the 2024 holiday shopping season, the retailer’s total sales rose 2.8%, with comparable sales increasing 2% compared to 2023. Online sales climbed 9% year-over-year. Same-day deliveries also went up 30% with the help of its subscription service, Target Circle 360.

Target also saw improved shopper traffic, as visits grew 3% in the last two months of the year. According to the company, December was the eighth straight month traffic increased.

“Our team delivered continued traffic growth and better-than-expected holiday-season performance, thanks to their focus on serving guests with an inspiring, easy, and joyous shopping experience,” said CEO Brian Cornell.

Target Saw Gains in Non-Essentials

Sales during Target’s promotional Circle Week event in October saw a significant boost. Despite inflationary pressures and strained budgets, COO Rick Gomez said consumers are still inclined to spend during certain events or holidays.

“It was one of our biggest Circle Weeks that we have ever had,” said Gomez at the National Retail Federation’s annual “Big Show” conference on Monday. “But the sales before the week and the sales after the week were lower. There was a dip in sales. The consumer was being very intentional.”

Target noted that sales reached record highs on Black Friday and Cyber Monday. Discretionary categories, such as apparel and toys, saw substantial “acceleration.” Non-essential spending by consumers is important for the retailer’s bottom line as these products tend to have higher profit margins than everyday household items like paper towels.

In the spring of last year, Target announced price reductions on over 5,000 items. To help consumers struggling with inflation, the cuts included many essential products, like diapers, pet food, produce, and milk.

Target’s fourth-quarter earnings results will be released on March 4. Other large retailers should be delivering their holiday shopping season earnings reports around the same time.