Target said its combined comparable sales for November and December fell 1.3 percent — spooking investors, who sent shares of the company down 6.2 percent to $66.60 in the afternoon trading Thursday on the New York Stock Exchange.
Brian Cornell, chairman and chief executive officer of Target said, “While we were pleased with Black Friday sales, December digital sales growth of more than 40 percent and continued strength in our signature categories, these results were offset by early season sales softness and disappointing traffic and sales trends in our stores.”
Comparable sales in the company’s stores fell more than 3 percent while digital sales grew more than 30, a trend that’s in keeping with many traditional retailers that have seen their growth siphoned off to the web.
“While we significantly outpaced the industry’s digital performance, the costs associated with the accelerated mix shift between our stores and digital channels and a highly promotional competitive environment had a negative impact on our fourth quarter margins and earnings per share,” Cornell said, adding that November and December traffic was flat and acknowledged “a more significant shift from stores to digital than we expected. Consumers [are] shifting to shopping online at a much more rapid pace.”
About 98 percent of Target’s customers regularly shop online. The retailer, which offered free shipping during the holiday season, doubled the number or orders it shipped, year-over-year. In the final days leading to Christmas, nearly 50 percent of Target.com orders were picked up in-store.
Comparable sales in electronics and entertainment declined in the high single digit range, while comps for food, which Target has been working to reinvent, and essentials both fell in the low single-digit range.
The company is on track to deliver adjusted earnings per share of $5 or more this fiscal year — an all-time high — but the fourth quarter results will fall short of the firm’s projections.
Target now expects adjusted fourth-quarter earnings of $1.45 to $1.55 a share, down from the $1.55 to $1.75 previously anticipated. The retailer will release its fourth-quarter results on Feb. 28.
The retailer is analyzing consumer shopping and purchasing patterns, noting that customers weren’t making impulse purchases in stores or online, buying specific items and shopping the remainder of Target’s assortment less.
Cornell admitted that Target’s advertising and promotions were a mixed bag during the holidays. “Consumers gravitated to our most compelling and easy-to-understand deals that matched their needs at a specific point in the season, like 30 percent off toys,” he said. In other instances, we learned that offers were overly complex or lacked excitement and newness.”
The discounter operates 1,803 stores and is working to adjust its business, following customers to the web. Many other retailers on the same path find themselves closing stores along the way.
Macy’s Inc. is closing 63 doors this spring under a plan first laid out last year and Sears Holdings Corp. is shuttering 109 Kmart locations and 41 Sears sites in a desperate bid to keep the ailing chains afloat. The Limited this month closed all 250 stores on its way to a bankruptcy filing yesterday and experts said Kohl’s and J.C. Penney, which also had dismal holiday seasons, may be next.