Investors aren't ready for Target's (TGT) solid holiday sales in 2025.
The large retailer announced total sales increased 2.8% year over year in November and December, with same-store sales up 2%. Record sales on Black Friday and Cyber Monday helped reverse a recent trend of lagging same-store sales growth.
Discretionary spending accelerated compared with the previous quarter, the release said. Digital sales also rose 9% year over year in November and December, reflecting "more than 30% growth in same-day delivery" for its membership model Target Circle 360.
CEO Brian Cornell said the team had a "better-than-expected holiday season" and made "Target a destination for consumers."
For the fourth quarter overall, the company expects same-store sales to grow about 1.5%, compared with previous guidance of flat growth. Wall Street had expected a gain of 0.18%, according to the Bloomberg consensus forecast.
The company did not raise its profit forecast, making investors cautious. The stock fell 2% in early trading Thursday. Joe Feldman of Telsey Consulting Group expects promotions, loyalty programs and higher production costs to put pressure on profits.
Target reiterated its fourth-quarter adjusted earnings per share range of $1.85 to $2.45. Wall Street expected earnings of $2.19 per share.
Jefferies' Corey Tarlowe said the company "ended the holidays with relatively clean inventory (as we saw in a recent channel check, some stores were even over-stocked). streamline)". "Port strikes were averted, but concerns about possible tariff risks remain," he added.
Feldman rates Target an outperform and likes the company's "fresh merchandising and digital transformation."
Tullow also believes Target has "further upside." The holiday sales period "reflects the company's value orientation, unique and differentiated categories, and enhanced digital presence."
In October, the company announced that it would reduce prices on more than 10,000 items during the year by the end of 2024.
In the third quarter, rival Walmart (WMT) reported adjusted earnings of $0.58 per share and same-store sales growth of 5.3%. Walmart has yet to report holiday results, but it raised its fiscal 2025 forecast for the third time last quarter.
Net sales are expected to increase 4.8% to 5.1%, and same-store sales are expected to increase 3% to 4%.
Walmart CEO Doug McMillon attributes the retailer's success to key investments it made before the COVID-19 pandemic.
"We've invested in employee wages, we've invested in employees in things like education, we've invested in lower prices, we've invested in e-commerce, we've invested in technology, all of those things," MacMillan told Yahoo! All were invested in a pretty tight time frame," said Finance's Brian Sozzi when Walmart was named a 2024 Company of the Year by Yahoo Finance.
Those bets paid off as the pandemic ushered in an era of curbside pickup and fast delivery. "I think it made a lot of people, customers and our colleagues realize that we were on the right track," he said.
Deadline: January 17, 4:00:02 pm ET
TGT WMT ^GSPC
Retail stocks have been under pressure. Earlier this week, ahead of the ICR conference in Orlando, American Eagle (AEO), Lululemon (LULU) and Abercrombie & Fitch (ANF) also shared strong holiday sales, but investors still sold off their stocks.
Investors "were buying a lot of these stocks because all the data points around the holidays were relatively positive," William Blair analyst Dylan Carden told Yahoo Finance, noting the preliminary Holiday Forecast.
However, once strong sales expectations prove correct, investors "walk away" from the trade, especially as margin risk rises amid uncertainty. Dana Telsey of Telsey Advisory Group said profits were an issue in a report to clients.
"As with last year, there was an unexpected uptick in holiday quarter sales, but what's new is that the inflow of profits was muted and there were only some positive comments about profitability. Sentiment related to consumer health remains constructive," she wrote.
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Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter: @Brooke Di Palma Or send an email to bdipalma@yahoofinance.com.
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