That said, profitability was a bit mixed as gross margin was impacted by increased markdowns. Target still managed to earned $961 million, or $1.47 per share, which was enough to meet Street expectations. When removing certain costs related to investment in its Canadian stores, earnings were higher at $1.65 per share.
Target wants to feed the Street's growth appetite, and it believes Canada is the perfect place to start. Despite already operating 1,778 U.S. stores, Target said it plans to open 24 stores in Canada by early April. Management said this will be the "first wave" of five that will begin its goal to open as many as 124 stores by the end of the year. This is in addition to opening up as much as 15 to 20 new stores in the U.S.
These are strong expansion objectives and investors are anxious to see how they're going to play out. These will go on as Target continues the redesigning of its stores to further separate itself from Wal-Mart. The company figures if the payroll tax is going to impact consumers, it will likely not be as big of a blow to the more affluent shopper, which is one of the reasons why Target has partnered with upscale designers like Neiman Marcus.
Since Wal-Mart and to some extent J.C. Penney are already struggling with slower foot traffic, Target can offset this weakness with an increased amount per transaction. Why not? This strategy worked in the fourth quarter. In the meantime, I'd like to see Target raise the bar on more international expansion, particularly in areas like China and Mexico where Wal-Mart is currently king.