Stellar Q1 comp begs question where to next?
April same-store sales at Target increased 1.1% and helped the company achieve a 5.3% first-quarter comps increase that was the highest in six years. How much of the performance was due to record warm weather versus good execution of a solid strategy against the back drop of an improved economy is debatable.
The 1.1% April comp wasn’t very impressive, unless of course you take into consideration the shift in Easter, which fell earlier this year and caused a portion of the sales related to the holiday to fall into March. That made for some wacky comparisons when viewed monthly basis. For example, in April 2011 the company reported a 13.1% comps increase. Given the magnitude of that increase, a 1.1% gain this year looks pretty good even though it is a lighter number compared with the February and March figures when exceptionally warm weather drove sales.
“We’re very pleased with Target’s strongest quarterly comparable-store sales performance in more than six years, which, as we’ve previously indicated, received an early-season boost from the combination of warm weather and an earlier Easter,” said Target chairman, president and CEO Gregg Steinhafel. “Target’s underlying sales trend remains quite healthy, as guests respond to a unique combination of fashion and great prices, combined with the convenience and value created by our remodel program and 5% REDcard Rewards.”
It’s good to see Steinhafel acknowledge that weather played a role in the company’s performance because it is far from clear whether the pace of sales activity is sustainable given larger trends in the overall economy. The other great unknown is to what extent ridiculously warm weather pulled forward consumer demand so that shoppers now don’t need to buy some of the stuff they would normally buy in the later spring and summer months. Given these variables, Target said it expects May same-store sales in the low- to mid-single digits.
As for April, once again comps were strongest in food, health and beauty and other household essentials. Comps in apparel declined modestly in April but remained slightly ahead of company performance for the first quarter. Hardlines and home both decreased in April, driven by Easter-sensitive categories. For the quarter, home experienced a low single-digit increase and hardline comps were essentially flat.