Target, Like Other Retailers, Did Not Have a Merry Christmas
NEW YORK (AP) – Target’s comparable store sales fell well below the previous year and it joined a growing list of retailers reporting meager performances during the critical holiday shopping season.
The company cut its expectations for same-store sales growth for the entire quarter Wednesday. Shares fell almost 7% at 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%.
The latest evidence of weak numbers from a major retailer cast a pall over the entire 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 getting nervous. The retail group was the worst performer on the S&P when markets opened.
The report of weak toys and electronics sales also hit other companies like Hasbro and Best Buy.
Target and big stores like Walmart have 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 government’s release of December retail sales Wednesday.
Retailers post fourth-quarter results next month and that will certainly provide more insight into the mood of U.S. consumers as 2019 came to a close.
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.
That was largely the sentiment among industry analysts.
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.
By AP reporters Michelle Chapman and Anne D’Innocenzio