Comps take a tumble at Target
A worse than expected 1% decline in November same store sales indicates the holiday season is off to a slow start at Target.
The 1% decline was substantially worse than the low single digit increase the company forecast at the start of the month when it reported a 2.4% increase for October that was toward the low end of guidance. The November weakness suggest traffic trends may be deteriorating at Target as the company said blamed the decline on a decrease in comparable store transactions following that metric’s flat performance in October.
"November sales were below our expectations, reflecting weaker-than-planned sales performance in the first two weeks combined with stronger sales growth across all channels later in the month," said Gregg Steinhafel, Target chairman, president and CEO. "Profitability for the month remained on plan, reflecting our efforts to balance thoughtful price investments in an intensely competitive environment with our continued focus on driving sales."
Steinhafel sought to reassure investors disturbed by the November performance that the best is yet to come from the company and indicated same store sales for the five week December reporting period would increase in the low single digits.
"With the upcoming launch of the Target/Neiman Marcus Holiday Collection, our unique assortment of exclusive, affordable merchandise and the compelling benefits of 5% REDcard Rewards and our Holiday Price Match, we believe Target has the right plans in place to allow our guests to shop with confidence throughout the holiday season," Steinhafel said.
As in prior months, Target’s strongest growth came in the food category which produced a mid single digit increase and in health and beauty which experienced a low single digit increase. However, the home and apparel categories both decreased in the low single-digit range and hardlines dropped by mid single digits. The company’s performance was strongest in portions of the south and softest in portions of the northeast.
The worse than expected comp figures comes as Target is experiencing a modest uptick in delinquency rates within in credit card receivables portfolio. Target said the percentage of accounts 60 days past due in November was 2.7% and the 90 days past due total was 1.9%. Those figures hit lows for the year of 2.5% and 1.7%, respectively, this past summer. Even at the slightly higher amount, both metrics are half of what they were several years ago.