What's going on?

Target reported better-than-expected quarterly earnings on Tuesday, as the US big-box retailer shows that it pays to plan three steps ahead.

What does this mean?

Target did all it could last quarter to mitigate the effect of supply shortages, buying $2 billion more in backroom stock than it normally would ahead of the holiday season. And that foresight paid off handsomely: customers made 8% more trips to Target�s stores and website last quarter than the same time in 2020, helping push overall profit up by a better-than-expected 12%. That growth�s arguably all the more impressive considering what the tail-end of 2020 looked like: the US was awash with cash after the government doled out stimulus checks to keep Americans afloat. Add in the fact that Target forecasted better-than-expected revenue growth for this year, and investors didn�t need much convincing: they sent the retailer�s shares up 13%.

Why should I care?

The bigger picture: Spend money to make money.
Trouble is, Target�s costs are due for a growth spurt too. The company announced earlier this week that it�s upping hourly wages, in hopes of better competing for workers in a competitive labor market. In fact, it reckons it’ll spend $300 million more this year on salaries and healthcare benefits alone, which � on top of already high supply chain costs � could end up dragging on the retailer�s profit margins (tweet this).

Zooming out: Inflation isn�t all that.
This is just another sign that the retail sector as a whole is in rude health. Walmart posted a robust set of earnings last month, and US department store Kohl�s � which is expecting the introduction of customer-favorite brands like Calvin Klein to help boost sales � gave a better-than-expected revenue outlook for the year on Tuesday. All these strong results suggest consumer demand is actually holding up pretty well � all the more surprising considering how fast prices are rising right now.