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Target’s quarterly profit jumps as holiday sales grow

February 25, 2015, 1:55 PM UTC

U.S. retailer Target (TGT) reported a stronger-than-expected jump in same-store sales and profits for the key fourth quarter, helped by its expanding online business, and forecast modest earnings growth in the current quarter.

Target said comparable sales at stores open longer than a year rose 3.8% in the November-January quarter. That beat its forecast, unveiled last month when it announced plans to pull out of the Canadian market, for a rise of 3%.

Adjusted earnings per share, which excludes items including a massive loss related to the Canada exit, came to $1.50 in the fourth quarter. That was above the $1.43 to $1.47 per share range forecast by the company last month.

The results suggest that Target has moved firmly past a damaging breach of consumer data that hurt sales during the holiday season in 2013 and prompted a change of management last year. The company is now focusing its resources on its U.S. business after the Canada exit, which triggered a pre-tax loss of $5.1 billion in the fourth quarter.

The fourth quarter is the most important for retailers due to the boost in demand for Christmas.

On an earnings call Wednesday, chief financial officer John Mulligan said the retailer will disclose plans for investments and cost-cuts to fund them at an analyst meeting next week.

“We will paint the whole picture for you next week,” Mulligan said, referring to the meeting on March 3. “We feel that we can pay for those investments with cost takeouts.”

When asked if those cuts could include job losses Mulligan said: “We’ve looked across the entire enterprise and think there are many opportunities across the company to reduce costs.”

In an earnings release CEO Brian Cornell said the company enjoyed strong sales of focus product categories including baby, kids and wellness and that efforts to reduce costs were bearing fruit.

“We’re confident that these efforts will allow us to grow our earnings while returning cash to our shareholders in 2015 and beyond,” Cornell said in the release.

For the current quarter to end-April, Target forecast adjusted earnings per share of $0.95 to $1.05, up from $0.92 in the first quarter of 2014 and compared with the average analyst estimate of $1.04, according to Thomson Reuters I/B/E/S.
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Target said it will unveil guidance for the full year at next week’s meeting of analysts.

For more on Target, read Fortune’s latest cover story Target has a new CEO: Will he re-energize the retailer? by Fortune’s Phil Wahba.