September solid, but not enough to elevate comp outlook
How good was the 5.3% same-store sales increase Target reported for September? We know it was toward the upper end of the company’s official guidance that called for a low to mid single-digit gain, but according to Richard Hastings with Global Hunter Securities it was the company’s best showing in September since 2006.
“Target seems to be finding renewed, favorable foundations for sales growth going into the holiday season, in our view,” according to Hasting. “A variety of areas of execution seem to be coming together to form a better basis for sales growth to persist through the holiday season.”
For example, Target appears to be delivering on its strategy of capturing a larger share of wallet from its best customers as an increase in average transaction size was the primary driver of September’s comp increase. Comparable-store transactions also increased a little more than 1%, inventories were said to be in very good condition and all regions of the country reported healthy gains. A good month to be sure, but Target chairman, president and CEO Gregg Steinhafel remained reserved in his tone and outlook for October comps in the low to mid single digits.
“We’re very pleased with our September comparable-store sales, which were somewhat ahead of our expectations. We experienced strong sales results throughout the month and across a broad array of merchandise categories, demonstrating Target’s ability to deliver on both sides of our “Expect More. Pay Less” brand promise and generate strong financial performance even in this soft economic environment,” Steinhafel said.
In terms of category performance, it was more of the same with food comps growing in the mid teens with beauty up in the high single digits. The overall household essentials category grew faster than the overall 5.3% increase. Comp-store sales in apparel and accessories were up more than the company average, led by a double-digit increase in the intimate, hosiery and performance categories and a high single-digit increase in kids’ apparel. The softest performance was in the jewelry and accessories area.
Comp-store sales in hardlines decreased in the low single-digit range with the strongest performance in toys and the softest performance again in electronics. Comp store sales in home furnishings decor increased in the low single-digit range, led by a mid single-digit increase in domestics, with the softest performance in decorative home.