Target (TGT -0.40%) on Wednesday posted earnings results for the fourth quarter, which included the critical holiday shopping season. The stock had been on a tear heading into the announcement -- up 30% in just the last six months. Investors had good reason for optimism as Target dumped its money-losing Canada business and showed signs of a rebound in customer traffic in the third quarter. The fourth-quarter results added to that positive momentum

Source: The Motley Fool.

Quarterly results
Target said sales grew 4% to $21.7 billion in the quarter. That was ahead of management's expectation and beat Wall Street's $21.6 billion revenue target. But the better news for investors is that Target logged a solid gain in customer traffic over the holidays. Transactions rose by 3% in the final months of 2014, compared to the 6% drop at the end of 2013, when a data breach kept shoppers away.

Comparable-store sales grew by 3.8% in the fourth quarter, a big improvement over the prior quarter's 1.2% gain. By comparison, rival Wal-Mart recently posted fourth-quarter comps of just 1.5%.

Online selling provided another boost to Target's results, contributing 1 percentage point out of its total comps growth. Digital sales rose by an impressive 30% in the fourth quarter.

The retailer booked $1.50 of adjusted earnings per share, while Wall Street pros had targeted $1.46 per share. Target's gross margin rose by a full percentage point to 29% of sales.

Target CEO Brian Cornell. Source: Target.

"We're seeing early momentum in our efforts to transform Target, and our team is entering the new fiscal year with a singular focus on continuing to differentiate our merchandise assortment and shopping experience while controlling costs by reducing complexity and simplifying the way we work," said new CEO Brian Cornell in a press release accompanying the results. 

Still, Target continued to feel the pain from its expensive trip into the Canadian market. The retailer took a massive $5.1 billion charge in connection with its discontinued business there. That writedown amounted to a $5.59-per-share loss in the fourth quarter, or $3.6 billion after taxes.

2015 outlook
Target's latest outlook includes an earnings forecast of roughly $1 per share in the first quarter, for 9% growth over the prior-year period. However, management declined to provide full-year sales and earnings guidance, saying it would issue those figures at Target's analyst meeting early next week.