Shares in Target Corp (NYSE:TGT) fell 3.4% to $130 on Thursday after the discount retailer raised its sales outlook but kept things unchanged for profits after what it said was a better-than-expected festive performance.
Sales during November and December increased 2.8% versus the prior year and comparable sales by 2.0%, with digital sales up 9%.
Further price cutting for Black Friday and Cyber Monday generated record-high sales.
Discretionary spending categories such as apparel and toys saw a "meaningful sales acceleration" compared to trends in the third quarter, the company highlighted.
Target said it now expects fourth-quarter sales to grow 1.5%, up from its prior guidance for roughly flat revenue.
It still expects adjusted earnings per share between $1.85 and $2.45 for the quarter.
CEO Brain Cornell said the better-than-expected holiday-season performance was thanks to a "focus on serving guests with an inspiring, easy, and joyous shopping experience".
Analysts at Jefferies said it was a "positive holiday period" for sales.
While EPS guidance was reiterated, "we still think margins are on an upward trajectory," they added, particularly as discretionary spending improves.
Bearish investors are "likely to view this momentum as more temporary in nature, but we point to traffic and digital increases".
"Importantly, discretionary improved," the analysts said. "We have heard from [Walmart] that the discretionary category is improving, which we think is a positive read-through for TGT, and we saw that in TGT's prerelease today, with discretionary trends improving versus Q3 levels, with notable momentum in apparel and toys".