Please ensure Javascript is enabled for purposes of website accessibility

Takeaways From Target's Top-Notch Q4 Report

By Motley Fool Staff – Updated Apr 11, 2019 at 9:11PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The discount retailer is one of the clear winners in the evolution towards an omnichannel market.

Investors should be quite happy with the holiday-quarter results that Target (TGT 0.06%) delivered Tuesday. It beat expectations on revenue and profits, and comp sales and digital sales growth were phenomenal. How does Target keep performing at this pace?

In this segment from MarketFoolery, host Chris Hill and analyst Abi Malin talk about the retailer's e-commerce strength, its operational chops, CEO Brian Cornell's tenure, the stock's performance, and more.

A full transcript follows the video.

10 stocks we like better than Target
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Target wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of March 1, 2019

This video was recorded on March 5, 2019.

Chris Hill: We're going to start with Target. Fantastic holiday quarter. Profits and revenue came in higher than expected. Their digital sales continue to climb. Stock up nicely today.

Abi Malin: The stock is up nicely. As you mentioned, this is their fifth consecutive year of digital sales growing at a greater than 25% clip, which is actually phenomenal for them. But overall, Target has continued to thrive even in the space of flagging retail, and I think part of that is tempered expectations from analysts. I don't think anyone was expecting that Q4 comp sales were 5.3%, including in-store sales up 2.9% and digital sales up 31%. Those numbers are just phenomenal, especially given the landscape of retail.

Hill: Yeah. The thing that stood out to me was that, that same-store sales number coming in higher than 5%. For a retailer of this size, I thought it was great. I was a little surprised when I went back over the last couple of years, looking through the various places that this stock has visited. I think of Brian Cornell, the CEO at Target, as being a fantastic leader of this business. I think this August is going to be the five-year anniversary of Cornell taking over as CEO. He came in at a tough time for Target. Had a great first year. Again, the stock has bounced around to different places. But I think operationally, Target is definitely in the upper echelon of the traditional bricks-and-mortar retailers, especially when you consider its size, and, to your point, especially when you consider what they've been doing with digital sales.

Malin: Yeah, they have a footprint of 1,800 stores. That's no small feat to manage. Increasingly in this space, you've seen, there's the really good operators -- Target, Walmart, Costco, -- and then you have your worse-off ones, and there's really no middle space. Again, I think you know the stock's reacting positively because even for the best of the best, this was a pretty phenomenal end of the year for them.

Hill: In terms of kicking off this new fiscal year, they seemed pretty optimistic. The guidance seemed pretty good. It seems like if, you're looking for the stock to move higher in a meaningful way over the next 12 months, they have to follow up this strong holiday quarter with at least a couple more -- maybe not coming in close to 5.5% comps, but they really can't do much worse than that.

Malin: Yeah. I think it's all relative, too, to overall market performance. We've been talking for -- it feels like forever -- maybe two years about how the markets seem highly valued and pretty frothy. You've seen the tech space heat up, and recently it's cooled off a little bit, so that's a little less volatility. But I think in the event that we do start to see less growth orientation in the market, Target could be actually well-positioned from an overall portfolio management strategy.

Check out the latest earnings call transcript for Target.

Abi Malin has no position in any of the stocks mentioned. Chris Hill has no position in any of the stocks mentioned. The Motley Fool recommends COST. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.