Target’s stock surges toward a 10-month high after big profit beat, as lower markdowns and shrink costs boost margins

Shares of Target Corp.
TGT,
-3.09%
shot up 5.5% toward a 10-month high in premarket trading Tuesday, after the discount retailer reported fiscal fourth-quarter profit that was well above expectations, as lower markdowns and lower shrink costs boosted margins. Net income for the quarter to Feb. 3 rose to $1.38 billion, or $2.98 a share, from $876 million, or $1.89 a share, in the same period a year ago. Excluding nonrecurring items, adjusted earnings per share of $2.98 beat the FactSet consensus of $2.42. Total revenue grew 1.7% to $31.92 billion, above the FactSet consensus of $31.83 billion. Same-store sales, or sales of stores open at least a year, fell 4.4% to beat expectations of a 4.5% decline. Gross margin improved to 25.6% from 22.7%, and shrink costs were lower than last year. Looking ahead, the company expects adjusted EPS of $1.70 to $2.10 for the first quarter, compared with the current FactSet consensus of $2.08, and expects full-year adjusted EPS of $8.60 to $9.60 versus expectations of $9.15. The stock has rallied 13.3% over the past three months through Monday, while the Consumer Staples Select Sector SPDR ETF
XLP,
+0.08%
has tacked on 5.7% and the S&P 500
SPX,
-0.12%
has advanced 12.3%.