Sales challenging, but profits up and outlook rosy at Target
MINNEAPOLIS — Target overcame modest fourth-quarter sales growth to report profits that exceeded its earnings guidance and also provided a better-than-expected outlook for 2012.
The company report adjusted earnings per share of $1.49, a full 10 cents better than analysts’ consensus estimate of $1.39, and said its 2012 adjusted profit would fall in the range of $4.55 to $4.75, well ahead of analysts’ estimated of $4.25. The company reported earnings on an adjusted basis to reflect sizable expenses related to pre-opening costs associated with the 2013 entry into the Canadian market. If those costs are included, fourth-quarter profits would be reduced by 6 cents per share and the 2012 profit guidance range would drop by 50 cents. Analysts tend to focus on the adjusted figures as a more accurate measure of underlying profitability because start-up costs related to Canada will eventually be recovered in the form of profits in future periods.
Fourth-quarter same-store sales increased 2.2% and total sales increased 3.3% to $20.9 billion. For the year, Target’s sales increased 4.1% to $68.5 billion.
“Target generated strong financial performance in 2011, overcoming sluggish economic growth, restrained consumer spending and an intensely promotional holiday season,” Target chairman, president, and CEO Gregg Steinhafel said. “For the full year, our U.S. businesses generated 14.3% growth in adjusted earnings per share, and we experienced our strongest growth in comparable-store sales since 2007.”
He added that the company will continue to focus on bringing the “expect more, pay less” brand promise to life by providing unique, well-designed merchandise while driving value and loyalty through the company’s 5% Rewards and REDcard Free Shipping programs.
Target ended the year with 1,763 stores.
TV goods show promise
The economy doesn’t seem to be hurting the As Seen On TV category. A.J. Khubani, CEO of Telebrands, said the company’s business is ahead 20% in 2011 over the previous year, and fourth-quarter sales were up 30%.
“One major drug chain told us that as a nonpharmacy revenue producer, the category is second only to the OTC cold and flu category,” Khubani said. That’s why chain drug retailers continue to devote more space to the category — and not just in the most profitable fourth quarter.
Two of Telebrands’ fourth-quarter launches, the Lint Lizard vacuum attachment and the OrGreenic 9-in. frying pan, are expected to be hits for the first half of 2012.
“Based on TV data and early retail numbers, those items from Telebrands — as well as IdeaVillage’s Magic Bullet and PediSpin, Ontel’s Slushy Magic and Clean Step mat, and Spark Innovators’ Salon Express — should be top sellers in the first and second quarters of 2012,” said Mike Govindani, president of Screen2Store, which represents top vendors in the industry.
Jordan Pine, president of SciMark Corp., also expected the Salon Express nail decorating kit and Telebrands’ Lint Lizard to be top performers. He bet that Trendy Top, a shapewear item from Amazing Products, also will have strong sales.
Pine said rather than following one trend in a specific category, sales in the category will be fueled by unique products at value prices. “As the Pillow Pet frenzy winds down in 2011, marketers will … start looking for the next hot category,” he said.
Khubani said kitchen items and pet products have been particularly strong areas for Telebrands. “Half of our revenue in 2011 came from pet products,” he said.
Products retailing for $10, $15 and $20 are the most popular price points, but the $10 spot is the biggest category mover.
The article above is part of the DSN Category Review Series. For the complete As Seen On TV Buy-In Report, including extensive charts, data and more analysis, click here.
Save-A-Lot to open four new stores in Pennsylvania
ST. LOUIS — Supervalu subsidiary Save-A-Lot is expanding its presence in Pennsylvania.
The company is slated to open four new stores in Pennsylvania in February and March, bringing the total number of Save-A-Lot stores in the state to 76, the company said.
“We are excited to be opening more Save-A-Lot locations in Pennsylvania to meet the needs of consumers looking for access to affordable, high-quality food, fresh produce and meat, as well as other grocery items,” Save-A-Lot president and CEO Santiago Roces said. “With food costs on the rise, Save-A-Lot is an ideal solution for customers looking to save money on their grocery bills.”
Save-A-Lot also reported that it was expanding its presence in New York, Ohio and Tennessee, opening three stores in each state in February and/or March.