To The Moon

$Target (TGT)$ have not been too volatile since the release of its Q4 results.Despite the same "tariff threat" and potential consumer downgrade, its Q4 profit beat and clear 25-year plan, combined with the effectiveness of its current omni-channel strategy, make it a good medium- to long-term watch. $Wal-Mart(WMT)$ $Costco(COST)$

Performance situation and market feedback

Q4 core financial metrics paper, margins beat expectations

• Revenue: $30.9B (-3.2% yoy), slightly exceeding market expectations of $30.77B (+0.48%).Since Q4 2023 has one more week than Q4 2024, excluding this effect, full year revenue growth on a comparable basis is ~1%;

• Earnings per share (EPS): GAAP and adjusted EPS were both $2.41, -19.1% yoy, but exceeded market expectations of $2.25 (+7.11%); full-year EPS was $8.86, -0.9% yoy, but up nearly 3% under comparable caliber;

• Margin: Q4 gross margin 26.2% (-0.4pct yoy), mainly driven by digital fulfillment costs and promotions; full year gross margin 28.2% (+0.7pct yoy), thanks to product optimization and advertising revenue growth. q4 operating margin 4.7% (-1.1pct yoy), full year operating profit $5.6B (-2.5%)yoy)

Comparable sales were relatively strong, with variations in performance of strategized categories

• Q4 same-store comparable sales growth of +1.5%, driven by traffic (+1.4% yoy) and digital channels; digital sales of +8.7%, with same-day delivery service (Target Circle 360) growing by >25

• Toys, electronics, and apparel sales exceeded expectations, with apparel and hardline merchandise growth improving nearly 4 pct from Q3; beauty and food & beverage categories continued to grow throughout the year;

• Own brand All in Motion sales exceeded $1B (+10% yoy), Target Plus third-party platform GMV reached $1B (double-digit growth); same-day delivery orders exceeded 40%, Drive Up service utilization rate +20% yoy.

• Cost control: cumulative cost savings over the past two years exceeded $2B, but Q4 SG&A expense ratio rose to 19.4% (+0.6 pct yoy)

Market Reaction:

• Shares were less volatile after hours following the earnings release (specific numbers not disclosed), but the revenue may support short-term sentiment with the EPS beat and clear 25-year plan.Investor concerns may center on margin pressure (e.g., rising supply chain costs) and a 2025 tariff risk warning.

Investment highlights

Results exceeded expectations but margins were under pressure

• Q4 revenue and EPS exceeded expectations, reflecting the company's resilience in a weak environment, especially the significant impact of digital transformation (e.g. same-day delivery) on customer traffic.

• Gross margin declined year-on-year, mainly due to increased promotions and high digital fulfillment costs, but the full-year gross margin improvement shows that long-term cost optimization is paying off.

Category differentiation and growth momentum

• High-growth categories: toys, electronics, and apparel were the highlights of Q4, showing seasonal demand and supply chain improvement; beauty category saw mid-single-digit growth throughout the year, reflecting differentiated product selection strategies.

• Potential risks: Demand for hard-line goods (e.g., household) remains to be seen, and consumer non-essential spending trends need to be watched;

• February sales decline was mainly due to weakness in non-essential consumer goods (e.g., home/electronics), but beauty (+7% yoy) and apparel (third consecutive quarter of market share gains) remained strong.Risks are hedged through a "limited time exclusive co-branding" strategy.

  

2025 Guidance and Risk Warning

• Company did not specify specific 2025 targets, but emphasized concerns about tariff impacts, which could impact gross margins; incremental revenue $15B+ over next five years, 2025 EPS guidance $9.5-$10.2 (Non-GAAP)

• Capital expenditures of $4-$5B in 2025, focused on

  • Opening 20+ new full-size stores (23 already opened in 2024), current new store ROIC of over 15%, to reach 75% of Americans in a 10-mile radius;

  • Supply chain: 15% improvement in inventory turnover efficiency (through store warehouse and distribution integration)

  • Digital: AI search optimization + social e-commerce integration to drive $20B digital business (Q4 growth +9%)

• Membership system monetization: Target Circle membership grew by 13M annually, key realization paths: paid subscription to Target Circle 360 (including same day delivery service), co-branded card spending share increased to 25% (daily 5% rebate), $2B ad revenue from media business Roundel (plan to double in 5 years)