Christmas sales soft at Target
Weaker than expected December sales at Target will cause fourth quarter profits to come in at the low end of an earlier forecast, the company said.
Sales at Target for the five week period ended December 31, increased 0.8% to $10.2 billion while same store sales were essentially flat, below the company’s guidance which called for an increase in the low single digits. The performance was driven by a low single digit decrease in comparable store transactions, offset by an increase in average transaction size.
"December sales were slightly below our expectations, as strong results late in the month did not completely offset softness in the first three weeks," said Target chairman, president and CEO Gregg Steinhafel. "Similar to November, profitability for December benefited from our continued focus on achieving an appropriate balance between price investments and driving sales, combined with thoughtful inventory management. As a result, we expect Target’s fourth quarter 2012 earnings per share will meet or somewhat exceed the low end of our prior guidance."
Target previously indicated it expects adjusted earnings per share in the fourth quarter to range from $1.64 to $1.74, or $1.45 to $1.55 if expenses related to the company’s 2013 entry into Canada are included.
December’s showing was against a relatively modest prior year increase of 1.6% and marked the second consecutive month that Target has missed its same store sale forecast. In November, the company reported a 1% decline in same store sales that was well below a forecast for a low single digit gain. At that time, Steinhafel assured investors that December comps would be in the low single digits and the company had the right plans in place to deliver seasonal results.
A key aspect of December’s weakness appeared to be weak sell through of the Target/Neiman Marcus Holiday Collection. The unique assortment of exclusive and pricy merchandise did not appear to resonate with customers, judging from 70% markdowns evident at some location where inventory levels remain disturbingly high.
Looking ahead to January, Steinhafel said he expect a low single digit same store sales increase for the comparable four week period. Speaking more broadly about 2013, he noted, "we will continue to focus on profitably growing Target’s market share by combining unique merchandise, convenience, value and an unbeatable guest experience across our stores, online and mobile channels."