Target Sees "Strong" February Sales, Monitoring Virus-Related Supply Chain Stress

Target Corporation's TGT management said that the company hasn't "seen a large impact" from coronavirus disruption during its 2020 Financial Community Meeting, which was held online due to virus concerns. The company's original plan called for live meetings with investors and analysts in New York.

The Minneapolis-based retailer reported 1.5% growth in comparable sales during its fiscal fourth quarter 2019, which ended February 1 with adjusted earnings per share (EPS) of $1.69, $0.03 ahead of analysts' expectations.

Target's Key Performance Indicators

When asked about the potential for vendor-related supply shortages, management said that they expect some "periodic delays," but that they continue to work with their domestic vendors to ensure supply as demand for some items has increased.

Management said that the company saw "strong sales" in February across multiple categories with "very strong" Valentine's Day-related buying. Further, they have seen an increase in consumers stocking up on essential health and disease prevention items related to the virus outbreak. Management expects the recent strength in demand to continue through Easter.

Full-year fiscal 2019 sales climbed 3.6% year-over-year to $77.1 billion.

Same-day delivery, which includes drive-up at-store fulfillment, in-store pick-up and its home delivery service, Shipt, remain the primary focus for the company.

Along those lines, the company reported a 20% increase in comparable digital sales in the quarter. For all of fiscal 2019, digital sales increased 28% to $6.8 billion and accounted for 12.3% of total sales, a 190-basis point increase.

2019 was the sixth consecutive year with more than 25% growth in digital sales.

"With 11 consecutive quarters of positive comparable sales growth, driven by healthy performance in both our stores and digital channels, Target's results demonstrate that we've built a sustainable business model that drives strong topline growth and consistent bottom line performance," said Target Chairman and CEO Brian Cornell.

The company's $7 billion, three-year investment launched in February 2017 includes several supply chain enhancements. On the call, management said that they are in the process of adding incremental warehouse space in some key markets and that the company's investment in machine learning has improved inventory control on essential products by one-third. Further, the company continues to build out its warehouse robotic automation, which pre-sorts inventory to align with a specific store's aisle layout.

Management's fiscal 2020 guidance calls for low-single digit comparable sales growth. Fiscal first quarter 2020 adjusted EPS guidance of $1.55 to $1.75 brackets the current consensus estimate of $1.66. Full-year fiscal 2020 adjusted EPS is forecast to be in a range of $6.70 to $7.00, compared to the consensus estimate of $6.88.

Target's store count increased 24 units year-over-year to 1,868 in fiscal 2019.

Home retail rival Walmart Inc. WMT reported full-year fiscal 2019 U.S. comparable sales growth of 2.8% with a 37% increase in U.S. ecommerce sales in its fiscal fourth-quarter report.

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