• by Sarah Mahoney  @mahoney_sarah, March 2, 2022

Target wowed Wall Street with its financial results this week, but it's the retailer's ambitious growth plans that have got marketers talking.

Annual sales topped $100 billion, powered by double-digit gains in all five key merchandise categories.

For the fourth quarter, the Minneapolis-based retailer says revenue rose 9.4% compared to the same period last year, reaching $31 billion. And operating income climbed 14.1% to $2.1 billion, up from $1.8 billion in the comparable period of 2020.

Digital sales jumped 21% for the full fiscal year. The retailer says it fulfilled 95% of all orders in its stores, further validating its omnichannel strategy of using stores as the primary distribution channel.

Roundel, its digital ad business, is expected to double revenue to about $2 billion over the next several years.

Target also announced stepped-up investments in store remodeling, new stores and its team, which it believes is core to delivering the best customer experience.

"We'll keep investing and delivering on all that has earned the loyalty and trust of our guests," says Brian Cornell, chairman and CEO, in the company’s announcement. "That starts with our outstanding team and includes continued differentiation through affordability, assortment, ease and convenience."

Among the changes: The chain says it will increase pay to $24 per hour in certain markets.

Target has held off on providing forecasts on sales and earnings for some time, citing pandemic-related uncertainties. But this week, even with the question marks of inflation and supply-chain kinks clouding the horizon, it is now predicting low- to mid-single-digit revenue growth in the year ahead and an ambitious operating margin rate of 8% or higher.

It's also tweaked its long-term financial algorithm. For 2023 and beyond, it anticipates mid-single-digit growth in total revenue and operating income. And it plans to spend between $4 billion and $5 billion on capital expenditures, including store remodels.

The chain is also bullish on the impact of the rollout of Ulta Beauty at Target shops, which have increased spending in premium categories. It is stepping up the program, adding more than 250 new locations in 2022. Ultimately, it expects to have 800 of the shops-within-the-store in place.

Peter S. Benedict, an analyst who follows the company for Baird, writes that there is plenty to like in the company’s announcements. “With plans to press its advantages in merchandising, fulfillment, and guest engagement while simultaneously scaling newer high value revenue streams, the company appears well positioned for continued profitable growth in a post-pandemic world.”

Target is continuing to build on what’s working, including strengthening private-label lines while deepening relationships with national brands, including Ulta.

Benedict also notes the company’s ongoing commitment to “accelerating personalization capabilities and growing new revenue streams. With about $20 billion in digital business and more than 100 million Target Circle loyalty members, Target has rich customer data/insights that it is leveraging to create relevance at scale."

And Neil Saunders, managing director of GlobalData, called Target's results "little short of spectacular."  

"Target has made itself a destination that consumers visit both out of necessity and out of choice," he writes in his comment on the quarter. "It is simultaneously convenient and inspiring, both of which were particularly important attributes over this holiday period."