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Stock Market Today: Strong Earnings Boost Retailers

By Jim Crumly – Updated Apr 11, 2019 at 1:13PM

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Target and Kohl's reported strong holiday sales as growth strategies took hold.

Investors were indecisive Tuesday, with stocks seesawing between gains and losses throughout the session. The Dow Jones Industrial Average (^DJI -0.38%) and the S&P 500 (^GSPC -1.03%) closed essentially flat.

Today's stock market

Index Percentage Change Point Change
Dow (0.05%) (13.02)
S&P 500 (0.11%) (3.16)

Data source: Yahoo! Finance.

Communications services was the strongest sector, led by large internet stocks; the PowerShares NASDAQ Internet ETF (PNQI -2.62%) rose 1.4%. Energy stocks were the laggards, with the SPDR S&P Oil & Gas Exploration & Production ETF (XOP -0.45%) falling 0.9%.

As for individual stocks, retailers Target (TGT -2.35%) and Kohl's (KSS 2.02%) announced strong fourth-quarter results and positive outlooks for 2019.

Stock graphs and price quotes.

Image source: Getty Images.

Target's online strategy is working

Target reported strong holiday-quarter sales and forecast 2019 profit above analysts' expectations, and shares rose 4.6%. Revenue came in at $22.7 billion, flat when compared with last year's Q4, which had an extra week in it, and adjusted earnings per share grew 12.5% to $1.53. Those results were about what Wall Street had anticipated, but the company guided to full-year adjusted EPS of $5.75 to $6.05, well above the $5.61 analysts were expecting.

Fourth-quarter comparable sales grew 5.3%, thanks to a 4.5% increase in traffic. Target had its strongest traffic and comparable-sales growth in over a decade. The company's digital strategy is helping drive growth, with a 31% jump in digital sales contributing 2.4 percentage points to overall comparable sales. In Q4, 10.4% of sales originated online, with nearly three-quarters of those sales fulfilled in-store. Gross margin has declined as digital sales have increased, but Target successfully cut expenses in other areas to compensate.

For 2019, Target expects low- to mid-single-digit growth in comps and a mid-single-digit increase in operating income.

Check out the latest earnings call transcripts for Target and Kohl's.

Strong profit lifts Kohl's shares

Shares of Kohl's jumped 7.3% after the department store chain reported fourth-quarter profit that exceeded expectations and gave strong guidance for 2019. Revenue declined 3.3% to $6.82 billion in the quarter, which was a week shorter than Q4 last year. Non-GAAP earnings per share increased 19.8% to $2.24. Analysts were expecting the company to earn $2.18 per share on revenue of $6.58 billion.

Comparable sales grew 1%, compared to a 6.3% gain in Q4 last year. For the full year, comps grew 1.7%, beating 2017's 1.5% increase. Looking forward, Kohl's expects comparable-sales growth of between 0% and 2% in 2019, and guided to EPS of $5.80 to $6.15, well above the $5.77 analyst consensus estimate.

On the conference call, Kohl's cited high-single-digit growth in activewear as a key driver of success last year. It also announced today that it will extend its active and wellness expansion to 160 of its highest-performing stores and partner with Planet Fitness, which will open gyms next to Kohl's stores, in the company's latest innovative move.

Jim Crumly owns shares of Target. The Motley Fool recommends PLNT. The Motley Fool has a disclosure policy.

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