Target Corp.'s beefed up options for holiday shoppers and offers such as free, two-day shipping paid off in market share gains and a same-store sales boost of 5.3 percent during the fourth quarter.
Store traffic was stronger than it has been in a decade and the Minneapolis-based retailer said all of its major merchandise categories gained market share, which cheered Wall Street.
Shares closed up 4.6 percent at $76.
Net income fell to $799 million, or $1.52 a share in the quarter that ended Feb. 2, compared to $1.99 a year ago, but in line with expectations. Adjusting for an extra week of sales last year and other one-time costs, earnings per share were $1.53 compared with adjusted earnings of $1.36 a year ago.
Sales were flat at about $23 billion.
The company said its stores handled three quarters of digital sales, which includes items that customers pick up themselves at stores or using a popular drive-up service, as well as those that are packaged and shipped to homes. Online sales were up 31 percent.
"We have been driving an ambitious agenda to transform our company, evolve with our guests and drive strong growth," Target Corp. CEO Brian Cornell said in a statement. "On every count we've been successful, and as we enter 2019, we will continue to lead the industry by adapting, innovating and delivering more for our guests and shareholders."
The company is hosting an annual meeting this morning in New York City with several hundred investors to discuss earnings and provide a deeper look into a $7 billion strategy to modernize operations and adjust to shoppers' needs for speed and convenience in the digital age.
Digital sales, measured as those that come from target.com or a mobile phone app, accounted for a little more than 10 percent of sales during the fourth quarter but are a growing part of the retailer's business as it takes on Amazon and Walmart and other e-commerce players.
Overall, it is the fifth straight year that Target has seen digital sales jump 25 percent or more.
On the year, the company reported net earnings of $2.93 billion, or $5.50 a share. Adjusted for the calendar shift, earnings were $5.39, setting an all-time high for the company.
In an early research note, Moody's analyst Charlie O'Shea said the company's strategic initiatives are "clearly bearing fruit."
"Target continued to build momentum in January, resulting in an exceptional fourth quarter and fiscal year, with margins holding steady despite a heavily-promotional holiday season combined with significant strategic investments across the board," he wrote.
Target's results come amid a busy earnings season for retailers, which is considered a bellwether industry for consumer confidence and economic resilience.
Kohl's also reported that store traffic was up for the holiday shopping season. Same-store sales were up 1 percent, compared to the anemic 0.3 percent analysts had expected. Costco Wholesale will report on Thursday.
Last week, Best Buy's Co. Inc.'s shares rose after it turned in robust results for its holiday season, with comparable sales up 3 percent. Other retailers _ including Walmart, Lowe's, Macy's and the parent company of TJ Maxx and Marshalls _ also have turned in strong fourth-quarter earnings.
Looking ahead, Target offered sales growth guidance in the low-to mid-single digit range in the first quarter and earnings of $1.32 to $1.52 per share. On the year, the retailer also expects a low to mid-single digit bump in comparable sales of stores open at least a year and earnings of $5.75 to $6.05.
The company made a big bet on toys during the holidays, hoping to pick up business from Toys 'R' Us. It reported that same-store sales grew 5.7 percent in November and December, the bulk of the gift-giving season. At the time it said the sales came from increased traffic, with a small increase in the average amount spent.
It's drive-up option grew more than 60 percent from a year earlier, when the service wasn't widely available. What started out as a 50-store pilot in the Twin Cities area in October 2017 now is in 1,000 stores.
In the past two years, Target has spent about two thirds of that $7 billion spiffing up shopping aisles at more than 400 locations and creating backroom shipping and packaging centers to get merchandise to customers at warp speed for little or no cost.
The company upgraded its website and digital shopping apps and sunk money into supply-chain logistics. It has launched nearly two dozen private labels in apparel and home decor to restore much-needed fashion panache to the brand.
