MINNEAPOLIS – Target, one of the best performers in retail in the last year, brought in lower-than-expected sales in November and December, the latest sign that the holiday season turned out to be a lackluster one.
The Minneapolis-based retailer said this morning that its comparable holiday sales rose 1.4%, well below the 3% to 4% the company had forecast.
“We faced challenges throughout November and December in key seasonal merchandise categories and our holiday sales did not meet our expectations,” CEO Brian Cornell said in a statement.
The company’s shares dropped 7% in premarket trading indications.
Target also announced a series of leadership changes. Its chief stores officer, Janna Potts, is retiring after more than 30 years with the company. She is being succeeded by Mark Schindele, another Target veteran, who most recently, as senior vice president of properties, oversaw Target’s extensive store remodeling efforts as well as the opening of new smaller-format stores.
In a discussion of its holiday results, Target executives said sales of electronics dropped 6%, home products declined 1% and toys were relatively flat during the holidays.
“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,” said Cornell.
But he added that because of the “durability of our business model,” Target was nonetheless able to maintain its profit guidance in terms of earnings per share for the fourth quarter.
There were bright spots in many of its higher-margin categories, including a 5% bump in apparel and 7% increase in beauty, that made up for the weakness in other areas. Target’s online sales rose 19%, driven largely by in-store pickup, curbside pickup and same-day delivery through Shipt.
Despite the lower-than-expected sales, Target executives said they continued to grow its market share in many categories, including toys, referencing data of tracking firms NPD Group and IRI. That seemed to suggest that industrywide holiday sales were also not as high as expected.
Walmart, Amazon, and Best Buy have not yet released their holiday results. But numbers in the last week from department stores and other specialty retailers, which have been struggling for awhile, have not painted a rosy picture so far.
J.C. Penney’s sales slid 7.5% in November and December. Kohl’s comparable sales slipped 0.2% in those two months, with women’s apparel being a particular weakness. Macy’s sales fell 0.6% and said it would close 29 stores. And L Brands, the parent company of Victoria’ Secret and Bath & Body Works, said its sales declined 3% during the holidays.
With low unemployment and months of strong consumer spending, many industry groups and research firms had predicted robust growth for this last holiday of between 4% and 5%.
But NPD Group said Tuesday that many key general merchandise categories saw just 0.2% growth during the holidays, according to its data, with apparel and toys experiencing the largest declines.
“Consumers continue to migrate to more ‘intangible’ gifting, putting more emphasis on experiences than things and focusing more on how they live than how they look this holiday,” Marshal Cohen, NPD’s chief industry adviser, said in a statement.
Mastercard SpendingPulse released figures last month that painted a very different picture, saying its data showed that holiday retail sales rose 3.4%.
Target’s shares have been trading at or near record highs in the last several months as the company has posted robust sales and profits at a time when many other retailers have been struggling.
In addition to the leadership changes announced Wednesday, the company said it is also making permanent the interim structure it had previously announced of splitting up the chief merchandising officer role among two executives in the wake of its previous chief merchant, Mark Tritton, leaving to become CEO of Bed Bath & Beyond. Christina Hennington will continue to oversee hardlines, essentials, and pricing and promotions while Jill Sando will be in charge of apparel, home and accessories as well as Target’s private-label brands. Both leaders will share the title of chief merchandising officer and will join Target’s C-Suite.
“This structure reflects the size, scale, and complexity of Target’s multi-category commercial businesses and operations,” the company said in a statement.