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Target Records Sluggish 2019 Holiday Sales

Target Corp. (NYSE:TGT) recently reported disappointing sales for the 2019 holiday period.

Bird's-eye view

In the holiday period, the big box retailer witnessed softer-than-expected performance in key holiday areas such as toys, electronics and portions of its home assortments, which comprehensively offset gains in apparel and beauty products.


The company's comparable store sales rose 1.4% in November and December, which was not only below the company's forecast but also failed to live up to the 5.7% growth it experienced a year ago.

In addition, the discount retailer saw weak digital sales during the holiday period. Target's digital sales increased only 19% as compared to the growth of 31% in the third quarter and 29% in the 2018 holiday season.

Target's CEO Brian Cornell said that the company "faced challenges throughout November and December in key seasonal merchandise categories and our holiday sales did not meet our expectations. While we knew this season was going be challenging, it was even more challenging than we expected."

Shifting gears, Target is not the only physical store retailer to have witnessed a slump in sales for the holiday period. JC Penney (NYSE:JCP), Kohl's (NYSE:KSS), Bed Bath & Beyond (NASDAQ:BBBY) and other department store chains also experienced poor holiday sales.

For the full 2019 calendar year, Target saw robust sales thanks increased consumer spending. Cornell remains optimistic, claiming that the company is slated to have a fabulous year ahead. Target has "built a financial model that -- despite the softer sales -- still delivered on the bottom line because of a strong gross margin mix, the unique role our stores played in digital fulfillment and our incredibly clean inventory position closing out the holidays."

In view of making shopping more convenient, Target has been opening smaller-format stores in urban markets and modernizing larger locations. The company has also introduced curbside pickup for online orders and added more private-label products. In fact, the company has invested in a new grocery line called Good & Gather, which is its biggest private label venture so far. Thanks to all these efforts, Target's shares rose to record highs in the recent months.

Performance of key categories

During the holiday period, sales dipped 6% for electronics and 1% for home products. On the other hand, toy sales remained relatively flat as compared to the year-ago period.

Despite the fact that the toys segment disappointed, the company managed to grow its market share in this category throughout the holidays.

Looking ahead

Despite the sluggish performance in the holiday period, analysts projects fourth-quarter comps to grow 3.8%, which is in line with the company's expectations of 3% to 4% growth. Thus, the company is on track to register 11 successive quarters of same-store sales growth. Cornell said, "Our fourth quarter performance will benefit from productivity improvements in our stores and supply chain, as well as meaningfully lower clearance inventory compared with a year ago."

Disclosure: I do not hold any positions in the stocks mentioned.

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This article first appeared on GuruFocus.