(Bloomberg) -- Target Corp. jumped on Tuesday after fourth-quarter profit beat estimates and the retailer announced plans to renovate and expand its fleet of stores.

The company reported adjusted earnings of $2.98 a share, above Wall Street’s estimate, with better inventory management helping to drive the results. Comparable sales declined 4.4%, slightly beating estimates but falling for the third consecutive quarter. 

Target has struggled with declining sales as consumers purchase fewer discretionary products higher inflation and interest rates erode purchasing power. This shift has prompted Target and other retailers to sell products on markdowns, hurting profits. A controversy around Target’s LGBTQ-themed products further hurt sales last year.

Target is on track to recapture growth in sales and customer traffic, as well as market share, executives said in a presentation to investors in New York. The shares jumped 13% at 1:25 p.m. in New York trading, the most since the company’s last earnings report on Nov. 15. The gain pushed the stock’s year-to-date gain to close to about 19%, eclipsing the gain of the S&P 500 Index over the same period.

The retailer plans to open more than 300 new stores over the next decade and upgrade its supply-chain technology, while renovating most of its existing locations. Most of the new stores will be larger and are expected to bring in additional sales of $15 billion by the time they are finished, executives said. Target will expand food and beverage offerings in these new, bigger formats.

Bigger stores look “really attractive as we look across the US right now and as we look at the returns that those stores are generating,” Michael Fiddelke, Target’s chief operating officer who is also serving as interim chief financial officer, said in an interview.

It’s an expansion of the company’s recent test of larger-format locations that have bigger back rooms to fulfill online orders. Target has also added more in-store shops with partners such as Ulta Beauty Inc.

The Minneapolis-based company also confirmed it will launch a paid membership program, going up against rival efforts from Amazon.com Inc. and Walmart Inc. Bloomberg previously reported that the retailer was weighing such a move. 

See More: Target Starts $49 Loyalty Plan to Compete With Amazon, Walmart

Lower Inventory

Target reduced its stockpile of merchandise by about 12% for the fourth quarter, better than analysts expected, meaning the retailer has less risk associated with markdowns the cost of managing inventory. Store and digital traffic declined 1.7%, better than the 4.1% slide in the third quarter. The company’s digital sales drop narrowed, and lower freight and supply-chain costs helped boost profits.

Sales of discretionary categories, including home, apparel, toy and electronics products, improved the most in the fourth quarter compared to the rest of the year, Fiddelke said, though the category remained in negative territory. Target expects comparable sales to return to growth in the second quarter. 

The company is working to be more flexible and faster as it works to reduce inventory and improve in-stock rates, he added. This includes placing smaller orders for merchandise.

Target said it expects comparable sales to range from unchanged to up 2% for the full year, reversing a lengthy slump. The company projects adjusted earnings of $8.60 to $9.60 a share. Both forecasts are roughly in line with estimates.

The results echo the sentiment from rival US retailers, which have struck a more upbeat tone about the economy. Walmart said it gained market share in almost all categories last quarter, and executives added their outlook about the economy has improved. Best Buy Co. said it expects the consumer electronics industry to return to growth, thereby increasing the company’s sales and operating income. Kroger Co. and Costco Wholesale Corp. are set to report earnings this week. 

Despite the more optimistic tone, Target Chief Growth Officer Christina Hennington warned that consumers “still feel stretched.” 

Shoppers are making trade-offs while treating themselves to the occasional luxury, she said. At the same time their appetite for new products has contributed to an uptick in demand for discretionary categories. Improvements in that part of the business are helping increase in-stock rates and allowing the company to react more quickly to trends, which bolsters sales, she added. 

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