Target Holiday Comps Disappoint As Home Falls Short

As it also unveiled executive changes, Target reported that November/December holiday season comparable sales registered a 1.4% increase but that home department comps were off slightly.

Target stated that overall sales came in below expectations, although e-commerce made gains with comparable digital sales increasing 19% in the holiday period. Sales through Target’s same-day fulfillment services, including order pick up, drive up and Shipt, advanced more than 50% from the November/December-period in the year prior, driving about three-quarters of the company’s digital sales growth.

Electronics, toys and certain home product segments were softer than expected, Target reported. Those departments account for about a third of the company’s holiday season sales.

By department, November/December comps were:

  • Apparel up 5%
  • Essentials & Beauty up 6% with the beauty segment up 7%
  • Food & Beverage up 3%
  • Home down 1%
  • Hardlines down 3%, with toys flat and electronics down 6%

Comp gains derived primarily from an increase in traffic, Target pointed out, combined with a small increase in average ticket.

Brian Cornell, Target chairman and CEO, said, “We faced challenges throughout November and December in key seasonal merchandise categories, and our holiday sales did not meet our expectations. However, because of the durability of our business model, we are maintaining our guidance for our fourth quarter earnings per share. We also remain on track to deliver historically strong full-year results in 2019, including comparable sales growth of more than 3% and record-high EPS reflecting mid-teens growth compared with last year. For the holiday period specifically, sales results came in below our expectations as we experienced softer-than-expected performance in areas of our business that are critical during the season, including electronics, toys and portions of our home assortment. Because these categories account for a much higher portion of sales during the holidays, they have a larger impact on our overall sales growth as compared to the rest of the year. At the same time, we’ve seen continued strength and market share gains in apparel, beauty, essentials and food and beverage. And in toys, despite approximately flat comparable sales, we continued to gain share over the holidays, according to data from the NPD Group.”

Because higher-margin rather than lower-margin categories tended to do better in the fourth quarter, Cornell said, “Our fourth quarter financial results will benefit from a stronger-than-expected gross margin mix in our holiday sales. In addition, our fourth quarter performance will benefit from productivity improvements in our stores and supply chain, as well as meaningfully lower clearance inventory compared with a year ago. Altogether, we are maintaining our previous guidance for Target’s fourth quarter earnings per share, consistent with the ranges we provided in our third quarter earnings release and conference call.”

Executive Changes

As for leadership moves, Target said Janna Potts, evp/chief stores officer is retiring. The company promoted Mark Schindele, who had been svp/properties, to evp/chief stores officer.

In addition, Target noted that it is formalizing the interim structure it announced for the company’s merchandising organization in October with the appointment of Christina Hennington to evp/chief merchandising officer, hardlines, essentials and capabilities, and Jill Sando to evp/chief merchandising officer, style and owned brands. The structure reflects the size, scale and complexity of Target’s multi-category commercial businesses and operations, the company maintained, and pointed out that Hennington and Sando will collaborate closely with Stephanie Lundquist, Target’s evp/president of food and beverage on the development and execution of a unified merchandising strategy for the retailer.