By  on February 17, 2006

NEW YORK — Target Corp.'s fourth-quarter results beat Wall Street analysts' estimates, but investors pulled back on the stock as they weighed the discount retailer's ability to deliver consistent profit growth.

As a result, the stock dropped to as low as $54.15 Thursday, before closing down 2.17 percent at $54.59 in New York Stock Exchange Trading.

In a research note from Gold­man Sachs, analyst Adrianne Shapira said Target's fourth-quarter gross margin rates were not up to par. Still, the retailer's results were robust, with net income rising 13.7 percent for the quarter on a 11.4 percent sales gain. And despite a drop in net income for the year-end period, Target posted more than $50 billion in annual sales.

For the quarter ended Jan. 28, profits climbed to $939 million, or $1.06 a diluted share, from $825 million, or 91 cents, in the same year-ago period. The discounter beat Wall Street's earnings per share estimate by 1 cent, according to a poll by Thomson Financial. Total revenues jumped 11.6 percent to $16.95 billion from $15.19 billion, which included sales rising to $16.57 billion from $14.88 billion. Comp-store sales rose 4.2 percent in the period. The company said its gross margin rate improved slightly from a year ago. The balance of the company's revenues is from its credit card operation.

For the year, net income fell 24.7 percent to $2.41 billion, or $2.71 a diluted share, from $3.2 billion, or $3.51, from a year ago. Total revenues rose 12.3 percent to $52.62 billion from $46.84 billion, which included a sales gain of 12.2 percent to $51.3 billion from $45.68 billion.

"Through our continued strategic investments and unwavering focus on delighting guests, we have delivered another year of outstanding performance. As we look to 2006 and beyond, we believe that we can continue to deliver an exceptional shopping experience for our guests, the workplace that is preferred by team members, the supportive environment for the communities where we operate and a superior return for our shareholders," said Robert Ulrich, chairman and chief executive officer, during a conference with Wall Street analysts.

Greg Steinhafel, president, said during the call that the company was pleased with its apparel and footwear offerings in 2005. He highlighted the retailer's Go International program, which focuses on the junior and contemporary customers. The program, a series of limited-engagement apparel collections from internationally renowned designers, is Target's way of adding "freshness and newness" on a day-to-day basis. The two lines to be launched in the fall, one featuring British designer Luella Bartley, will be available for 90 days.

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