Target (NYSE:TGT) 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
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.
"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.
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.
Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.