Target, like other retailers, did not have a Merry Christmas
Comparable store sales at Target fell well below the previous year, joining a growing list of retailers reporting meager performances during the critical holiday shopping season.
The discounter on Wednesday cut its expectations for same-store sales growth for the entire quarter. Shares fell more than 7% before the opening bell.
Target experienced weaker-than-expected sales of electronics, toys and home goods. Comparable sales climbed 1.4% in the November-December period, compared with a very strong 5.7% increase a year earlier.
Digital sales rose 19%, also down from last year’s jump of 29%.
Target Corp., based in Minneapolis, said it now foresees fourth-quarter comparable sales growth in line with the 1.4% increase it experienced during the holiday period. It had previously forecast a rise of between 3% and 4%.
Target’s disappointing performance raised some concern regarding just how strong the holiday 2019 season was.
The weak numbers cast a pall over the retail sector and the broader markets as well with investors leery of any hints that the consumer, a major driver of the U.S. economy, is pulling back. The retail group was the worst performer on the S&P minutes before the market opened.
Target, along with other big stores like Walmart, has been one of the strongest performers in retail even as Amazon continues to make inroads. They have reconfigured product lineups and improved delivery services with some success.
Other department stores, namely those in malls, have not had the same success. J.C. Penney, Kohl’s and L Brands, the parent company of Victoria’s Secret, all reported holiday sales declines. Macy’s reported a small decline in holiday sales, though it was better than what investors had expected.
The National Retail Federation, the nation’s largest retail trade group, forecasts that holiday sales will rise between 3.8% and 4.2% for November and December. The holiday sales forecast marks an increase from the disappointing 2.1%. But it’s above the average holiday sales growth of 3.7% over the previous five years. The group is expected to release final holiday results Thursday following the goverment’s release of December retail sales figures Wednesday.
Retailers post fourth-quarter results next month and that will certainly provide more insight into consumer behavior toward the end of 2019.
Neil Saunders, managing director of research firm GlobalData Retail, said Target’s holiday performance wasn’t dire, as it was going to be tough for it to top its strong year-ago results. He also noted that the disappointing electronics and home sales were impacted by the timing of Black Friday, coming later this year.
“Overall, Target remains a good retailer on the right trajectory. It may have stumbled and slowed over the holidays, but it is still one of the most attractive runners in the retail race,” Saunders wrote.
Target is expected to report its 11th straight quarter of increases for same-store sales.
Seth Sigman of Credit Suisse agreed, saying that “there are many bright spots within that would point to this being more of a blip rather than the start of a new trend.” The analyst said while comparable sales of toys were flat, the category likely gained share. He also noted solid sales gains in categories such as clothing, beauty and food and beverage.