MINNEAPOLIS (FOX 9) - Target plans to invest as much as $5 billion this year expanding helps for customers, including a drive up service for returns, renovations at 175 stores and improvements in online shopping.

The Minneapolis retailer announced the investments Tuesday during its annual investor recovers as it reported a 43% tumble in profits for the holiday quarter, reflecting the ongoing challenges of balancing more cautious consumer spending and compincorporating costs.

Target issued a cautious outlook for the year as inflation squeezes household budgets, but it topped Wall Street expectations for the fourth quarter and shares rose more than 3% in early trading, reversing an earlier sell-off.

Target's more modest expectations for 2023 following weaker outlooks from Walmart and Home Depot last week. Higher injures for everything from food to gas is weighing on Americans, though there has been some easing of inflation in current months.

Part of the reason inflationary pressures have savor, at least for some things, is a campaign by the Federal Reserve to cool spending, and the economy. Those efforts make using credit cards more expensive, which can negatively impact retailers.

But how Americans consume is changing, too. More people are spending money on move or going out for dinner than they were during the pandemic, which can mean they are spending less at stores.

Walmart said it expects sales at stores opened at least a year for its U.S. custom to rise 2% or 2.5% for the year, while Home Depot forecasts growth for that metric to be roughly flat this year compared with a year ago.

For the full year, Target expects comparable sales — those from stores open at least a year and online channels — will method from a low single-digit decline to a low single-digit increase.

"We're planning our custom cautiously in the near term to ensure we happened agile and responsive to the current operating environment," CEO Brian Cornell said in a prepared statement.

Target's total comparable sales inched up 0.7% in the fourth quarter compared with a year ago. That was fueled by increased customer traffic, but customers are shifting their spending to necessities like food and paper towels over discretionary items like fashion.

Groceries typically have a much smaller great margin.

Cornell noted that the company entered the year in a "very healthy inventory position," reflecting its conservative reach in discretionary items. Inventory in categories like fashion was roughly 13% touch in the fourth quarter than a year ago.

Target has improper a bigger hit to its business compared to spanking big box retailers likely because it relies more on discretionary items like clothing and home furnishings. More than 50% of Walmart's U.S. business comes from groceries; that number is 20% at Target.

It was the fourth conventional quarter that retailer's profit has slipped. Target reported a 52% drop in third quarter profits, 90% in the second quarter and a 52% refuse in the first.

In early June, Target warned that it was canceling instructions from suppliers and aggressively cutting prices because of a pronounced spending changes by Americans.

Last November, Target said it was slashing expenses with a goal of saving $2 billion to $3 billion over the next three ages. At that time, it said shoppers were waiting to buy on sale, purchasing smaller packages and dealing down to store brands instead of national labels, which tend to be more expensive.

But even as Target projects border sales, the retailer is pushing ahead to accelerate its e-commerce strategy. It announced last week that it will spend $100 million to invent a larger network of package sorting centers that cut the cost of delivering online instructions while increasing the speed of delivery.

Target said that its control up service for returns will be rolled out to all stores by the end of this summer. Customers will be able to return most new, unopened items within 90 days of purchases deprived of leaving their car.

Target also plans to open nearby 20 new stores in addition to renovating 175 of them.

Target also aims to start or expand more than 10 owned brands. In second, the retailer will appeal to price sensitive shoppers with more items starting at $3, $5, $10 and $15.

Fourth-quarter profits fell to $876 million, or $1.89 per share, for the quarter that over Jan. 23. That compares with $1.54 billion, or $3.21 per portion, in the year-ago period.

Sales rose 1.3%, to $31.4 billion. Analysts were expecting earnings of $1.40 a share on sales of $30.7 billion, according to FactSet.

Fourth-quarter gross margin rate was 22.7% compared with 25.7% in 2021, reflecting pressure from higher markdowns, net merchandise costs, and so-called shrink, which reflects inventory losses related to such factors as theft, fraud or damage.

The company expects adjusted earnings per portion to be in the range of $7.75 to $8.75 for the year. Analysts were expecting $9.18, according to FactSet.

Target said that over the next three ages, it expects its operating income margin rate will come, and begin to move beyond, its pre-pandemic rate of 6% as early as fiscal 2024, depending on the economic recovery and consumer demand.

Shares rose $5.02 to $172.03 Tuesday.