Target sees brighter 2022 with easing supply pressures

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U.S. retailer Target Corp (TGT.N) posted record holiday quarter earnings on Tuesday and forecast an upbeat 2022 as it expects supply chain pressures to ease later in the year, lifting shares 14%.

Margins remain front and center for investors this earnings season, with big retailers spending heavily to expedite shipments and hiring thousands more people to navigate bottlenecks and ensure well-stocked shelves.

“We see supply chain constraints that are steadily working themselves out but will likely take more time… made more uncertain by the crisis in Ukraine (following the invasion by Russia),” Chief Executive Officer Brian Cornell said on an earnings call.

Minneapolis-based Target said raising prices would be the last lever it pulls to combat higher costs, but expects profits to improve later this year, as sales are boosted from new online options and same-day delivery.

The retailer said it would invest up to $5 billion this year – compared with the $4 billion it outlined for 2021 – to remodel stores, open more mid-size outlets and improve its online business to sustain the sales momentum.

NO SLOWDOWN

Sales at Target and Walmart (WMT.N) surged during the pandemic, and the retailers are building on those gains using their scale and negotiating power with suppliers to undercut smaller rivals through competitive pricing and gain market share.

“The retailers who have been able to mitigate the supply chain issues and all the headwinds have gained an advantage over mom & pop stores,” said Jessica Ramirez, retail analyst at Jane Hali & Associates.

Target expects low- to mid-single-digit revenue growth in fiscal 2022, compared with estimates of a 2.18% rise. It forecast adjusted profit to rise by high single-digits, above estimates of a marginal increase.

Source: Reuters

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