Retailers Target, Best Buy Q4 Results Top Estimates

(RTTNews) - Retailer Target Corp. (TGT) and Best Buy Co., Inc. (BBY) reported Tuesday net profits for the fourth quarter that declined from last year, but earnings per share and quarterly revenues at both retailers topped analysts' estimates. The companies also provided outlook for the full-year.

Discount retailer Target reported that net earnings for the fourth quarter decreased to $1.10 billion or $2.41 per share from $1.38 billion or $2.98 in the year-ago quarter, which included an additional week.

On average, 32 analysts polled expected the company to report earnings of $2.25 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter declined 3.1 percent to $30.92 billion from $31.92 billion in the same quarter last year, which included an additional week. Analysts expected revenues of $30.83 billion for the quarter.

"Our team grew traffic and delivered better-than-expected sales and profitability in our biggest quarter of the year. Results were led by strong performance in Beauty, Apparel, Entertainment, Sporting Goods and Toys," said Brian Cornell, chairman and chief executive officer of Target.

Total comparable sales increased 1.5 percent in the quarter, as strong traffic and digital performance, with comparable store sales declining 0.5 percent, while comparable digital sales grew 8.7 percent as same-day delivery powered by Target Circle 360 grew more than 25 percent compared to last year.

Comp sales trends in Apparel and Hardlines accelerated by nearly four percentage points as compared to the third quarter.

Gross margin decreased 40 basis points to 26.2 percent, reflecting higher digital fulfillment and supply chain costs as well as higher promotional and clearance markdown rates, partially offset by the net benefit of other merchandising activities.

"Looking ahead, we expect to see a moderation in this trend as apparel sales respond to warmer weather around the country, and consumers turn to Target for upcoming seasonal moments such as the Easter holiday," said Jim Lee, chief financial officer.

Looking ahead to fiscal 2025, Target expects earnings and adjusted earnings in the range of $8.80 to $9.80 per share on net sales growth of around 1 percent, with comparable sales growth in a range around flat.

The Street is looking for earnings of $9.27 per share on revenue growth of 2.58 percent to $109.15 billion for the year.

In light of ongoing consumer uncertainty and a small decline in February net sales, combined with tariff uncertainty and the expected timing of certain costs within the fiscal year, Target expects to see meaningful year-over-year profit pressure in its first quarter relative to the remainder of the year.

Meanwhile, electronics retailer Best Buy's net earnings for the fourth quarter plunged to $117 million or $0.54 per share from $460 million or $2.12 per share in the prior-year quarter, hurt by huge goodwill impairment.

Excluding items, adjusted earnings for the quarter was $2.58 per share, compared to $2.72 per share a year ago.

Analysts expected the company to report earnings of $2.41 per share for the quarter. Enterprise revenues for the quarter declined to $13.95 billion from $14.65 billion in the same quarter last year. Analysts had a consensus revenue estimate of $13.70 billion.

Comparable sales increased 0.5 percent, compared to a decline of 4.8 percent last year.

Domestic comparable sales edged down 0.2 percent and revenue decreased 5.2 percent from last year to $12.72 billion, mainly due to the extra week of revenue totaling approximately $675 million last year. Domestic online revenue of $5.02 billion increased 2.6 percent from last year.

International comparable sales grew 3.8 percent and revenue edged down 0.2 percent to $1.23 billion, largely due to the extra week of revenue totaling approximately $60 million last year and approximately 500 basis points of negative foreign currency impact.

Looking ahead to fiscal 2026, the retailer now projects adjusted earnings in a range of $6.20 to $6.60 per share on revenues between $41.4 billion and $42.2 billion, with a comparable sales growth of 0.0 to 2.0 percent.

The Street is looking for earnings of $6.60 per share on revenues of $41.81 billion for the year.

For the first quarter, the company expects comparable sales to be slightly down to last year.

Best Buy also announced its board of directors approved a 1 percent increase in the regular quarterly dividend to $0.95 per share, payable on April 15, 2025, to shareholders of record as of the close of business on March 25, 2025.

The company said it expects to spend approximately $300 million on share repurchases during fiscal 2026.

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