Target posts 4Q gain
Discount chain benefits from higher sales in recession.
February 28, 2002: 4:01 p.m. ET
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NEW YORK (CNN/Money) - Target Corp. said Thursday its fourth-quarter profit jumped 20 percent from a year earlier, coming in a penny per share higher than Wall Street expected, as price-conscious consumers flocked to its discount stores amid a recession.
The operator of Target, Mervyn's and Marshall Field stores posted earnings excluding items of $663 million, or 73 cents a share, up sharply from $552 million, or 61 cents a share, a year earlier. Analysts polled by earnings tracker First Call expected 72 cents a share.
Fourth-quarter sales increased 7.2 percent to $13.2 billion from $12.2 billion and were a bit shy of analyst forecasts of $13.3 billion, according to First Call. Sales at stores open at least a year, a key retail performance gauge, climbed 4.6 percent. Same-store sales at core Target stores jumped 6.2 percent in the quarter.
On a conference call with investors, Target said that Wall Street estimates for the first quarter of 31 cents a share and for the full year of $1.75 are achievable, but warned it could miss if the U.S. economy worsens.
"(A figure of) $1.75 is a reasonable single-point estimate. I think the chances of exceeding that are 50 percent and therefore chances of falling short of that are somewhat less than that, in my opinion," Target Chief Financial Officer Douglas Scovanner told investors on the call.
That was enough to spook traders who sent Target (TGT: down $2.00 to $41.90, Research, Estimates) stock down nearly 5 percent in trading Thursday.
Nevertheless, Jeffrey Klinefelter, a retail analyst at U.S. Bancorp Piper Jaffray, said the company called Target's fourth quarter outstanding, adding that future results look bright as well.
"What should be considered here is that the first quarter is off to a very strong start," Klinefelter said.
Including a one-time charge for a debt repurchase, Target had net earnings of $658 million, or 72 cents a share, for the quarter ended Feb. 2.
The company also asserted confidence in achieving average annual earnings per share growth of 15 percent.
"We are extremely pleased with our overall results for fiscal 2001, particularly the strength of our fourth quarter," Target CEO Bob Ulrich said in a statement Thursday.
Discount chains such as Target and Wal-Mart Stores Inc. have proved the best performers during an economic recession as consumers hunt for money-saving bargains. Though Wal-Mart offers the lowest prices, Target has captured a niche as the place for "cheap chic," attracting a more upscale consumer with its fashionable yet bargain-priced home furnishings and fashions, such as its Mossimo apparel line.
Target and Wal-Mart Stores Inc. (WMT: Research, Estimates) are also capturing market share from Kmart Corp. (KM: down $0.02 to $1.12, Research, Estimates), which filed for Chapter 11 bankruptcy protection in January.
However, Klinefelter said it's too early for either Target or Wal-Mart to claim a chunk of Kmart's business.
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For the full year, Minneapolis-based Target earned $1.4 billion, or $1.56 a share, before unusual items, up 12 percent from $1.3 billion, or $1.38 a share, in the prior fiscal year. Net earnings grew 8.3 percent to $1.4 billion, or $1.50 a share.
Full-year sales jumped 8.1 percent to $40 billion from $37 billion.
Sales at Target stores increased 10.5 percent to $11 billion in the quarter. Marshall Field's sales declined 8.3 percent and Mervyn's sales fell 3.5 percent. 
From staff and wire reports
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