(Reuters) -Target Corp forecast 2022 sales and profit above analysts’ expectations on Tuesday, after posting a 9% rise in holiday quarter sales even as the big box retailer battled supply chain disruptions and record inflation.
The company’s shares, which have fallen nearly 14% since the start of the year, rose 12% in premarket trading.
For fiscal 2022, Target expects low- to mid-single digit revenue growth, compared with analysts’ estimate of a 2.18% rise. It also forecast adjusted profit to rise in the high single-digit range, while analysts expect a marginal rise.
Margins remain front and center for investors this earnings season as big retailers spend heavily to expedite shipments and hire thousands more to get around global supply chain bottlenecks and ensure well-stocked shelves.
Gross margins fell to 25.7% in the fourth quarter, from 26.8% in 2020, and the company said it expects first-quarter operating margins to be well below 2021 levels.
However, the Minneapolis-based company was optimistic about profits improving later in the year, banking on tie-ups with companies such as Starbucks on curbside pickup shopping options to drive sales, as well as speedy same-day delivery services.
Rival Walmart Inc also predicted gross margins to improve this year, buoyed by higher prices and a greater reliance on its alternative online businesses such as advertising.
Comparable sales at Target rose 8.9% in the quarter ended Jan. 29, but missed analysts’ expectations of a 10.23% increase, according to IBES Refinitiv data.
Target’s total revenue rose by a smaller-than-expected 9.4%, the first miss in nearly two years, as an earlier-than-usual start to Christmas shopping led to U.S. retail sales dropping by the most in 10 months in December.
On an adjusted basis, Target earned a profit of $3.19 per share in the fourth quarter.
(Reporting by Aishwarya Venugopal and Uday Sampath in Bengaluru; Editing by Sriraj Kalluvila)