Target forecasts prosperous 2022 with supply-chain improvements

US retailer Target 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 12% in early trading.

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 it expects profits to improve later this year, as sales are boosted from new online options and same-day delivery.

Same-day businesses, which allow shoppers to pull into a store and pick up goods in minutes or get them delivered within hours, rose 45% in 2021, the company said.

Target self-checkout stations
At many stores, customers who don’t want to check themselves out can opt for curbside pickup
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In-store partnerships with Apple and Ulta Beauty, and a new tie-up with Starbucks  on curbside pickup are also expected to add to store traffic.

Major retailers like Target and Walmart saw sales surge to record levels during the pandemic, and are building on those gains as they use their scale and negotiating power with suppliers to undercut smaller rivals 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.

Customers outside Target store
An expected easing of supply-chain woes will mean customers like these get more of their products when they want them.

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.

Sales rose 9.4% to $30.62 billion in the fourth quarter. Target earned an adjusted profit of $3.19 per share, beating estimates of $2.86.

In other Target news, the chain said on Monday that it would raise its hourly starting pay to $24 in parts of the US with tightest labor markets.