Key Takeaways for Brands Following Target’s 4Q Results & Investor Update

February 28, 2023

Target ($109B in annual sales) reported its fourth quarter results this morning along with hosting an investor day.

Management reiterated its long-term strategy, while highlighting some near-term positives and acknowledging the uncertainty around predicting consumer demand in ‘23.

Both comps (0.7%) and operating margins (3.7%) in 4Q came in ahead of conservative expectations. In addition, management feels positive about where it is with inventory, down 3% in total and down 13% in problematic discretionary categories on a year-over-year basis.

The company sees opportunity in front of it for both top-line growth and margin improvement in ’23 and beyond. It called out lapping inventory markdowns and freight costs as positive margin drivers and a portion of the $2-$3B from its efficiency savings initiative hitting this year. In addition, the company continues to see the consumer responding positively to newness, even in weaker discretionary categories.

eCommerce results were more mixed and generally weaker than what Walmart and Amazon delivered. The company saw Y/Y declines in total eCommerce, while growing its same day services by 4.5%. eCommerce penetration was slightly lower on a Y/Y basis for the quarter and the year.

Read on for a summary of Target’s results and how to adapt to its evolving environment.