Operating profit will post a percentage increase in the low single digits this year, the retailer said Tuesday, bucking Wall Street’s expectations that the closely watched number would decline. Target also predicted steady financial gains beyond 2022 as it expands e-commerce capabilities and bolsters its store network.
“The highlight of the release is the 2022 guidance,” Michael Baker, an analyst at D.A. Davidson, said in a note to clients. “This shows that the operational improvements, which were taking hold prior to the pandemic, along with the share gains over the last two years, are proving to be sustainable.” “This change highlights the asset efficiency of our stores-as-hubs model, which has unlocked the full potential of our store locations to flexibly serve our guests,” he said.
Operating income will amount to at least 8 percent of sales this year, Target said. That outlook eased worries expressed by analysts including Steven Shemesh of RBC Capital Markets, who had warned before the report of a risk that Target would reset expectations with a lower forecast.“It’s now clear that the company has more control over costs than the Street gave it credit for,” Shemesh said in a note to clients after Target reported results.