Sales challenging, but profits up and outlook rosy at Target

MINNEAPOLIS — Target overcame modest fourth-quarter sales growth to report profits that exceeded its earnings guidance and also provided a better-than-expected outlook for 2012.

The company report adjusted earnings per share of $1.49, a full 10 cents better than analysts’ consensus estimate of $1.39, and said its 2012 adjusted profit would fall in the range of $4.55 to $4.75, well ahead of analysts’ estimated of $4.25. The company reported earnings on an adjusted basis to reflect sizable expenses related to pre-opening costs associated with the 2013 entry into the Canadian market. If those costs are included, fourth-quarter profits would be reduced by 6 cents per share and the 2012 profit guidance range would drop by 50 cents. Analysts tend to focus on the adjusted figures as a more accurate measure of underlying profitability because start-up costs related to Canada will eventually be recovered in the form of profits in future periods.

Fourth-quarter same-store sales increased 2.2% and total sales increased 3.3% to $20.9 billion. For the year, Target’s sales increased 4.1% to $68.5 billion.

“Target generated strong financial performance in 2011, overcoming sluggish economic growth, restrained consumer spending and an intensely promotional holiday season,” Target chairman, president, and CEO Gregg Steinhafel said. “For the full year, our U.S. businesses generated 14.3% growth in adjusted earnings per share, and we experienced our strongest growth in comparable-store sales since 2007.”

He added that the company will continue to focus on bringing the “expect more, pay less” brand promise to life by providing unique, well-designed merchandise while driving value and loyalty through the company’s 5% Rewards and REDcard Free Shipping programs.

Target ended the year with 1,763 stores.