Target on Tuesday posted same-store sales that climbed 3.4 percent during the holiday season, topping an expected range of 0 to 2 percent, and raised its fourth-quarter and full-year earnings outlook.
The big-box retailer said tax reform legislation should create additional cash flow in 2018 it will use for capital investments, dividends and share repurchases. The new tax laws will also boost Target’s profits, similar to an announcement Macy’s made earlier this week.
Target’s stock climbed around 4 percent during premarket trading on the news.
“As we look ahead to 2018, we will build on the foundation we established this year by launching additional exclusive brands, enhancing our digital capabilities, opening approximately 30 small-format stores and tripling the size of our remodel program to more than 325 stores,” CEO Brian Cornell said in a statement.
Target now expects fourth-quarter adjusted earnings per share to fall within a range of $1.30 to $1.40, compared with a prior range of $1.05 to $1.25. For fiscal 2017, Target is calling for adjusted earnings per share of $4.64 to $4.74, compared with previous estimates of $4.40 to $4.60.
Target said fourth-quarter comparable sales should climb closer to 3.4 percent, compared with a prior estimate of 2 percent growth. That would mean fiscal 2017 comparable sales rise a little more than 1 percent, compared with a prior forecast calling for as much as 1 percent.
Same-store sales in its home, apparel, food and beverage, hardlines and essentials categories all accelerated from the third quarter during the November and December months, Target explained.
The company said online sales are on track to grow more than 25 percent in 2017, marking the fourth year Target’s digital business surpasses that milestone.
With one eye on e-commerce, Target has also invested more in its stores, pouring money into both renovating existing locations and rolling out a fleet of smaller-format stores in urban markets. CEO Cornell said Tuesday that Target’s stores fulfilled 70 percent of all digital orders during the holiday season.
“We’ve positioned our stores at the center of a continually expanding suite of convenient fulfillment options,” he added.
Just last month, Target announced plans to acquire grocery delivery service and Instacart competitor Shipt, with the goal of offering same-day delivery of groceries, home furnishings, electronics and other products, starting as early as this year. Target also recently bought transportation technology company Grand Junction, expanding its last-mile fulfillment capabilities.