(Reuters) – Target reported an unexpected rise in sales in the last three months of 2022, helped by the effect of promotions in its North American stores, while warning, like other retailers, about its results in 2023 due to economic uncertainties.
The group, which exceeded quarterly profit estimates for the first time in a year, saw its title increase by 2.2% in advance of the stock market.
Soaring prices in 2022 have weighed on demand for non-essentials, forcing retailers to cut prices on everything from toys to electronics to clear inventory.
The promotions, which drove a 0.7% increase in footfall at Target’s stores during the fourth quarter, however, contributed to a 3 percentage point drop in gross margins.
The retail group has forecast annual earnings of $7.75 to $8.75 per share, below analysts’ estimates of $9.23, according to Refinitiv data.
“Target had to revise its forecasts downwards quite quickly last year, and therefore does not want to make the mistake of being too aggressive in its forecasts again,” said John Tomlinson, an analyst at M Science.
Retailers are also cautious, given a more uncertain economic environment, he added.
U.S. retail giants including Walmart and Home Depot also issued cautious forecasts for 2023 last week, fearing an economic slowdown in the second half of the year due to rising borrowing costs.
“We are planning our business cautiously in the near term to ensure we remain agile and responsive to the current operating environment,” Target Chief Executive Brian Cornell said.
Its comparable sales for the quarter ended January 28 increased by 0.7%, while analysts expected a decline of 1.5%.
The discounts reduced inventories of non-essential products by about 13% at the end of the quarter compared to a year earlier, the group said.
(Reporting Uday Sampath in Bangalore; French version Diana Mandiá, editing by Kate Entringer)
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