Walmart’s EDLP assault didn’t faze Target in April

The 13.1% increase in same-store sales Target reported for April was toward the low end of the company’s projection of an increase in the mid-teens, but it doesn’t appear Walmart’s mid-month launch of a new marketing campaign contributed to the weakness.

Target’s total sales for the period increased 13.7% to nearly $4.9 billion compared with roughly $4.3 billion during the same month last year. Easter had a huge impact on the company’s results, as it did for many other retailers as the holiday fell three weeks later this year, causing seasonal sales to shift into the April reporting period and, in Target’s case, made for an easy comparison to a prior year comps decline of 5.9%.

As for the potential impact of Walmart’s renewed emphasis on everyday low prices and a major advertising campaign that debuted the week prior to Easter, Target didn’t address the issue specifically, but did make it clear that, as has been the case in prior months, more people are shopping its stores and comps growth is coming from food and consumables. Both of those departments are undergoing fairly dramatic expansion in stores as Target remains in the midst of an aggressive, multi-year remodeling initiative known as PFresh, which has as a signature component the addition of fresh foods.

The prominence of food and consumables drives shopper frequency, and Target made it clear that more than half of its increase in same-store sales was due to growth in same-store transactions with the remainder of the increase resulting from an increase in average transaction size. In addition, the company said its April same-store sales performance was strongest in the grocery category, which experienced a 30% gain, while boys and girl’s apparel comps advanced about 20% as did the hardlines category.  However, health care and beauty was up in the mid- to high-single digits, while the home category advanced in the low- to mid-single digits.

“April comparable-store sales were somewhat below our expectations, as guests continued to be very cautious in their spending leading up to Easter,” according to Target chairman, president and CEO Gregg Steinhafel. “Target remains focused on delivering an outstanding shopping experience, providing unbeatable value on high quality, well-designed items throughout our assortment. This is more important than ever for our guests as they face increasing pressure on their household budgets due to higher energy costs and increasing prices of food, apparel and home merchandise.”

Going forward, Target has forecast its same-store sales for May will increase in the low- to mid-single digit range, which suggests the company isn’t anticipating the loss of shopper traffic to Walmart, even though Walmart will presumably remain aggressive with messaging around price, breadth of assortment and matching of competitors’ advertised prices.