Stock falls as retailer forecasts flat holiday sales

Target could benefit from some holiday cheer from shoppers after the retailer reported declining sales over the past three months — and expectations of a lackluster holiday shopping season.

Shoppers did not spend as much on clothing and other discretionary products such as furniture, appliances and electronics in the three months ending November 2. However, sales of beauty products increased by 6%.

Target is also forecasting flat comparable sales in the current fourth quarter, which includes the holiday shopping season – a troubling sign for the retail industry as a whole.

During the third quarter, Target reported a 0.3% increase in comparable sales from a year ago, but that still fell short of Bloomberg’s average analyst estimate.

Same-store sales fell 1.9%, while digital sales rose 10.8% in the quarter, the company said.

That’s a forecast that pales in comparison to Walmart’s expected 4.8% to 5.1% increase in sales in the current quarter, including the holiday shopping season, announced Tuesday by the retailer.

“Consumers continue to spend cautiously, particularly in discretionary categories,” Target CEO Brian Cornell said on a conference call Wednesday, while detailing the company’s financial performance.

Target stock opens with sharp decline

Target shares fell 20% in early trading Wednesday. This sharp decline has caused the company’s stock price to fall approximately 14% year to date.

“Volatile operating environment”

While the retailer saw an increase in store traffic, Cornell called the third quarter a “volatile operating environment,” in a statement accompanying the results.

“We saw several strengths across the business, including a 2.4% increase in traffic, nearly 11% growth in the digital channel and continued growth in the beauty and frequency categories,” Cornell said. “At the same time, we have faced unique challenges and cost pressures that have impacted our financial results. »

Total third-quarter revenue of $25.7 billion, up 1.1% from a year earlier, fell short of the $25.9 billion expected by analysts surveyed by S&P Global Market Intelligence.

Increased digital sales reduced profits due to the higher cost of fulfilling orders, the company said. The company also experienced higher supply chain costs due to managing higher inventory levels, which occurred because the retailer ordered more goods to compensate for a potential port strike. October 1.

Nervous, bargain-hungry shoppers responded well to Target Circle Week, held October 6-12. But sales fell in the week before and after the sales event, the company said, suggesting how resourceful customers have become.

And executives expressed excitement that customers will be drawn to stores for the upcoming Nov. 29 release of Taylor Swift’s “The Tortured Poets Department: The Anthology” on vinyl and CD, exclusively at Target, which includes four acoustic bonus songs (the vinyl album also includes a Swift poster).

During the period, the retailer added nearly 3 million members to its Target Circle loyalty program, which it revamped in April.

Target also reduced prices on more than 2,000 items this holiday season.

Although buyer visits increased by 2.4% during the three-month period, this figure is lower than the traffic growth of 3% during the previous quarter.

Yet shoppers haven’t spent on those “discretionary purchases that Target relies on,” Zak Stambor, an analyst at eMarketer, told USA TODAY.

“Target’s third-quarter performance stands in stark contrast to Walmart’s, highlighting the big differences in their product lines. Groceries account for about 60% of Walmart’s sales, but only 23% at Target,” he said. -he declared. “Walmart’s success in grocery shopping has helped it win over wealthier consumers, and its push to offer more high-end products in beauty and clothing is helping it steal market share at Target.”

Unlike Walmart and Costco, “Target hasn’t found a formula that works in this macroeconomic environment,” Stambor said. “While it claims to have lowered prices on nearly 10,000 items by the end of the holiday season, this strategy is not enough to convince shoppers to spend.”

Walmart “is executing better and Target is really missing the mark,” Arun Sundaram, an analyst at investment research firm CFRA, told Reuters.

“Things took a turn (for Target) in the third quarter. And it looks like the weakness is going to persist into the holiday season as well,” Sundaram said.

(This story has been updated with new information.)

Contributor: Melissa Ruggieri, USA TODAY; Reuters.

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