Why the target stock price soared this week

target (TGT -0.51%) Investors had a good week. Shares of these companies were up 13% in Friday morning trading, compared with a 1% gain for the broader market, according to data provided by S&P Global Market Intelligence. The rally has made it a good year for owners of the retail giant, with shares up 20% so far. Although it was scaled back, the stock price underperformed. S&P 500 Over the past year, the index has risen 27% while the index has risen only 4%.

This week’s surge was fueled by good news on earnings.

good earnings news

Target reported its fourth-quarter earnings before the markets opened Tuesday, and Wall Street liked the results. Sure, comparable store sales were down for another quarter. This is unfortunate considering there is a greater variety of retailers out there. walmart It is growing steadily. However, Target’s customer traffic metrics improved, with a loss of less than 2% compared to 4% in the previous quarter. This success demonstrated that a new merchandising strategy that emphasizes value is working.

Meanwhile, Target continues to take big positive steps toward its bottom line. Operating margins have essentially bounced back completely from their post-pandemic slump and are now back at the 6% rate shareholders saw in 2019. It’s good news for business that Target can achieve those margins even when sales are down. Once the consumer discretionary industry stabilizes, it could potentially achieve 8% of sales.

looking ahead

Management expects the sales slump that has weighed on the stock for more than a year to come to an end. They explained that comps will likely fall as much as 5% in the first quarter, but will likely rebound for the remainder of 2024. Management is calling for comps to reach about 1% growth this year after falling 4% in fiscal 2023.

Now comes the hard part: executing a growth turnaround. There are many factors that could delay or even derail this rebound, including changes in consumer spending habits. However, Target appears to be on the cusp of a return to growing customer traffic in 2024, paving the way for much stronger annual profits going forward.