Target Corporation shares were down in pre-market trading on Tuesday, March 4, after the company reported solid fourth-quarter results but also delivered a cautious outlook for 2025 due to concerns over tariffs and weaker February sales putting “meaningful year-over-year profit pressure” in its first quarter relative to the remainder of the year.

The retailer reported that total comparable sales in the fourth quarter increased 1.5 percent year-over-year, reflecting a comparable store sales decline of 0.5 percent and a comparable digital sales increase of 8.7 percent.

The fourth quarter and full-year results include one less week than the prior year due to the NRF 4-5-4 retail calendar.

Net sales amounted to $30.9 billion in the quarter, down 3.1 percent compared with Q4 2023, which included an additional week. Operating income was $1.5 billion in fourth quarter 2024, a decrease of 21.3 percent from $1.9 billion in 2023.

Fourth quarter SG&A expense rate was 19.4 percent in 2024, compared with 18.8 percent in 2023.

Fourth quarter operating income margin rate was 4.7 percent in 2024 compared with 5.8 percent in Q4 2023. Fourth quarter gross margin rate3 was 26.2 percent, compared with 26.6 percent in 2023, reflecting higher digital fulfillment and supply chain costs and higher promotional and clearance markdown rates. These pressures were said to be partially offset by the net benefit of other merchandising activities.

The company reported fourth-quarter GAAP and Adjusted earnings per share (EPS) of $2.41, compared with $2.98 per share in 2023.

The company’s fourth quarter 2024 net interest expense was $90 million, compared with $107 million last year.

Fourth quarter 2024 effective income tax rate was 21.5 percent, compared with 22.6 percent last year. The decrease was primarily driven by higher discrete benefits in fourth quarter 2024.

“Our team grew traffic and delivered better-than-expected sales and profitability in our biggest quarter of the year,” said Brian Cornell, chair and CEO of Target Corporation. “Results were led by strong performance in Beauty, Apparel, Entertainment, Sporting Goods and Toys. As we look ahead, our continued investments in digital capabilities, stores and supply chain—combined with a focus on newness, value, speed and reliability—will further differentiate our one-of-a-kind physical and digital shopping experience.”

Full-Year Summary
Full-year net sales decreased 0.8 percent to $106.6 billion in 2024 from $107.4 billion in 2023, reflecting a 0.1 percent increase in comparable sales as well as the benefit of sales from new stores and growth in non-merchandise revenues, offset by the impact of one fewer week of sales in 2024.

Full-year SG&A expense rate was 20.6 percent in 2024, compared with 20.0 percent in 2023. Rate increases in both periods reflect higher costs, including continued investments in pay and benefits.

Full-year operating income of $5.6 billion in 2024 declined 2.5 percent from $5.7 billion last year. Full-year gross margin rate was 28.2 percent, compared with 27.5 percent in 2023, reflecting product cost improvements, growth in advertising and marketplace revenues and lower book-to-physical inventory adjustments, which more than offset higher promotional and clearance markdown rates and higher digital fulfillment & supply chain costs.

GAAP and Adjusted EPS were $8.86 for full-year 2024, compared with $8.94 in the prior year.

Full-year 2024 net interest expense was $411 million, compared with $502 million in 2023. For both the fourth quarter and full-year, the decrease was driven primarily by an increase in interest income.

The company’s full-year 2024 effective income tax rate was 22.2 percent compared with 21.9 percent in 2023. The increase primarily reflects lower discrete tax benefits compared to the prior year.

Capital Deployment and Return on Invested Capital
The company paid dividends of $513 million in the fourth quarter, compared with $508 million last year, reflecting a 1.8 percent increase in the dividend per share.

The company repurchased $506 million of its shares in the fourth quarter, retiring 3.7 million shares of common stock at an average price of $136.80. As of the end of the fourth quarter, the company had approximately $8.7 billion of remaining capacity under the repurchase program approved by Target’s Board of Directors in August 2021.

For the trailing twelve months through fourth quarter 2024, after-tax return on invested capital (ROIC) was 15.4 percent, compared with 16.1 percent for the twelve months through fourth quarter 2023. This decrease was driven primarily by lower profitability, including the impact of one fewer week in the 2024 fiscal year, and an increase in average invested capital. The tables in this release provide additional information about the Company’s ROIC calculation.

Guidance
Target delivered a cautious outlook for sales growth in its current financial year as it pointed to concerns over the uncertainties surrounding President Trump’s trade policy and tariffs.

The company reported the following expectations for full-year 2025:

  • Net sales growth in a range around 1 percent, reflecting comparable sales growth in a range around flat, while pointing to weakness in February. Wall Street was looking for 1.7 percent growth;
  • A modest increase in the company’s operating margin rate compared to full-year 2024;
  • An effective tax rate of 23 to 24 percent; and
  • GAAP and Adjusted EPS of $8.80 to $9.80 per share.

“In light of ongoing consumer uncertainty and a small decline in February net sales, combined with tariff uncertainty and the expected timing of certain costs within the fiscal year, the company expects to see meaningful year-over-year profit pressure in its first quarter relative to the remainder of the year,” the company stated in a media release.

“During February, we saw record performances around Valentine’s Day. However, our topline performance for the month was soft, as uncharacteristically cold weather across the U.S. affected apparel sales, and declining consumer confidence impacted our discretionary assortment overall,” said company CFO Jim Lee. “Looking ahead, we expect to see a moderation in this trend as apparel sales respond to warmer weather around the country, and consumers turn to Target for upcoming seasonal moments such as the Easter holiday. We will continue to monitor these trends and will remain appropriately cautious with our expectations for the year ahead.”

Image courtesy Target Corporation