shoppers newport target story holiday

Wall Street is bracing for the official holiday reckoning — hoping for signs of joyous celebration, but cleared-eyed about the prospects of a promotion-induced hangover.

This week, merchants are expected to start updating investors on the Christmas rush from Black Friday and through the new year. Generally sales are seen as having increased, but the question remains just who gained the most ground and the toll of price cuts to lure shoppers.

While the fiscal year for most retailers doesn’t officially end for another few weeks, the post-holiday read is an important wrap-up for many companies, which also use the occasion to set the tone for the year ahead and layout cuts to the store base.

Antony Karabus, chief executive officer of HRC Advisory, said many retailers are seeing store sales lag online growth.

“That store fleet is going to be less profitable than it was before, which means retailers are going to have to take a harder look at closures of marginal stores because the balance is shifting,” Karabus said.

“The total size of the market available to the traditional brick-and-mortar retailer has declined because Amazon has continued to take billions upon billions [of dollars] out of the market,” he said. “The bar is being raised.”

And investors are ever watchful — and ever fearful.

Many retailers weathered sharp stock declines recently as the overall market grew more volatile and the Black Friday sales momentum was lost to an early December lull.

Target Corp., in particular, has something to prove when it updates investors on Thursday.

Seth Sigman, an analyst at Credit Suisse, said he’s looking for signs of stronger market share and margins from the discount retailer, which has spent heavily to reinvent its business for the digital age.

“A lot needs to go right this week for this stock to move up,” Sigman said of the update Thursday. “Holiday results come at a critical time for the story, as the market weighs broader cyclical risks, as well as debates whether Target’s position in the marketplace has truly improved, as we believe it has, versus just a rising tide.”

Sigman said Target would need to deliver holiday comparable sales gains of at least 5 percent to pass muster, which likely requires stronger market share gains.

As Target seeks to prove it can break away from the pack, the department store sector has an uneven outlook. Although companies in the space have taken many steps to reinvent, the business model is still on trial on Wall Street and it is not clear exactly how the format fully translates into a new age of retailing.

Michael Binetti, an analyst at Credit Suisse, said he was maintaining a “cautious posture” toward Macy’s Inc., Kohl’s Corp. Nordstrom Inc. and J.C. Penney Co. Inc.

The analyst’s company-by-company commentary painted a picture of a very mixed department store world. He noted:

* Macy’s has tougher comp comparisons this month than in November and December, “potentially limiting the ability to drive accelerating comps.”

* “Kohl’s may have the most interesting opportunities of the group — Kohl’s could finally announce a bigger partnership with Amazon in 2019, make a bigger push into cosmetics, and a planned relaunch of the credit/loyalty programs in 2019 could be significant.”

* Nordstrom has the analyst “concerned” about “exposure to the high-income consumer given the recent volatility in the stock market.”

* J.C. Penney “continues to work through recent inventory missteps, and a new ceo/cfo team needs to lay out a much clearer direction to help offset the significant structural issues ahead for this moderate department store — e.g., how to unwind previous strategic missteps like appliances.”

And Binetti isn’t expecting the environment for discretionary spending to improve this year, when a strong job market helped fuel spending and buoy optimism.

“Bottom line, while we expect the group to report modest same-store sales growth during holiday 2018, we see minimal reason to expect a rotation into department store stocks in the near-term,” he said.