Despite better-than-expected holiday sales, Target's profits did not meet expectations.

• Holiday shoppers boosted customer traffic across stores and the website, leading Target to raise its fourth-quarter sales forecast.
• The discounter said Black Friday and Cyber Monday saw record-high sales.
• Despite initial concerns, the retail industry's key season has shown better-than-expected results, but has not met the expectations of investors.

Its fourth-quarter sales forecast was raised on Thursday due to an increase in consumers shopping at its stores and website, especially during discount days.

Target anticipates a 1.5% increase in comparable sales in the fiscal fourth quarter, which is an improvement from its previous forecast of flat growth. Comparable sales encompass sales made on Target's website and stores that have been operational for at least 13 months.

Despite anticipating an increase in profit, Target did not revise its outlook, indicating that discounts drove sales. The company expects its fourth-quarter earnings per share to range from $1.85 to $2.45 and its full-year earnings per share to be between $8.30 and $8.90. Target will release its full fourth-quarter earnings results on March 4.

In early November, Target cut its profit guidance after posting its biggest earnings miss in two years. The company attributed some of its struggles to weaker sales of discretionary merchandise and the expenses associated with preparing for an October port strike.

The latest report from Target provides a critical view of the industry's current season. Although data suggests that the season has been better than anticipated, investors have not been satisfied. For instance, companies such as and raised their fourth-quarter outlooks on Monday, but their shares traded lower that day.

On Friday, the company revised its full-year sales forecast, but only after a cautious initial projection. Meanwhile, its department store rival announced on Monday that its sales will be at or slightly below the low end of its previously stated range of between $7.8 billion and $8.0 billion.

The National Retail Federation will release its holiday sales summary on Thursday.

Despite high inflation for over two years, discounts and sales events have remained a significant sales driver. However, it is uncertain how much these deals will impact Target's and other retailers' profit margins, and whether sales will continue to improve if promotions decrease.

In the combined months of November and December, Target reported a 2.8% increase in total sales and a 2% increase in comparable sales year over year. Additionally, digital sales grew by nearly 9% compared to the previous holiday period.

Target's growth areas, including its subscription service and third-party marketplace, contributed to a significant increase in holiday sales.

Online and in-person visits led to a nearly 3% increase in guest traffic during the two holiday months compared to the previous year, according to the company. Additionally, Target reported that December was the eighth consecutive month of year-over-year traffic growth.

Target has announced price cuts on over 10,000 items this year, including frequently purchased items such as diapers, bread, and milk, as well as cold medicine, toys, and ice cream during the holiday season.

Target reported record-breaking sales during Black Friday and Cyber Monday, with discretionary categories such as apparel and toys experiencing a significant increase in sales compared to the fiscal third quarter. These categories, which typically have higher profit margins than essential items like milk and paper towels, often go on sale during the holiday season.

At the NRF's annual "Big Show" conference, Target COO Rick Gomez stated that the company experienced a significant increase in sales during promotional days, including its Circle Week, which took place in early October and coincided with Amazon Prime Day.

"Although we had one of our largest Circle Weeks, sales before and after the week were lower. There was a dip in sales, and the consumer was being very intentional."

Despite being on a budget, U.S. consumers are still willing to spend on special moments like holidays or on a "must-have item," as evidenced by the retailer's sale of almost 1 million copies of Taylor Swift's hardcover book about The Eras Tour.

Target announced changes to its leadership team, including the retirement of Chief Stores Officer Mark Schindele and the appointment of Adrienne Costanzo as his replacement, effective in early February.

Target's Chief Information Officer, Brett Craig, will retire after 15 years with the company and be replaced by Prat Vemana, who will take on the role of Chief Digital and Product Officer. Meanwhile, Sarah Travis, who has been serving as senior vice president of Roundel, Target's advertising business, and social commerce, will become the company's Chief Digital and Revenue Officer, a new leadership role.

Jim Lee, the former deputy chief financial officer of PepsiCo, has been appointed as Target's new chief financial officer, replacing Michael Fiddelke, who is now the company's chief operating officer.

Target's CEO, Brian Cornell, has agreed to stay for three more years, and the company is currently on track for a leadership change at the top. The retirement age was scrapped by the board, and the company has not yet announced when Cornell's contract will end or who will replace him.