Target Corporation (NYSE: TGT) was among the hottest retailers heading into the 2019 holiday season. So when the company reported disappointing holiday results on Wednesday, the stock tumbled.
So what went wrong at Target?
'Far Short' Of Expectations
Target's same-store sales growth grew in the holiday period by just 1.4%, CNBC's Courtney Reagan reported on "Squawk on the Street." Management guided fourth-quarter same-store sales to be close to 1.4%, which is "far short" of expectations of around 4%. Comparable holiday digital sales grew "just" 19% and were "well short" of growth rates investors have gotten used to.
Some categories were strong, she said. Apparel sales rose 5%, essentials & beauty gained 6%. These categories come with superior margins, which allowed the company to reaffirm its earnings forecast.Same-day fulfillment orders rose 50% year-over-year and cost 90% less to fulfill versus a delivery order.
Key holiday categories were poor, however, including flat performance in toys and a 6% drop in electronics. Certain home goods were also weak. Home, toys and electronics combine for around one-third of total holiday season sales, Reagan said.
Biggest Surprise Yet
Heading into the holiday season, it's easy to distinguish the winners and losers in the retail universe, columnist Andrea Felsted said on "Bloomberg Surveillance." Target was very much in the winners' category, so Wednesday's announcement is the "biggest surprise yet" in the holiday season.
The performance is particularly disappointing as Target saw weakness in toys. Felsted said something has "gone really wrong here" as Target earned a reputation of bolstering its products to sell only items customers really want to buy.
Cramer: Blame Apple?
The holiday season could have been dominated by Apple Inc. (NASDAQ: AAPL) and Target isn't considered by consumers as a go-to destination for Apple products, said CNBC's Jim Cramer. In fact, an "Apple Christmas" could have been reason enough to move the needle against Target.
Shoppers instead may have shopped at Costco Wholesale Corporation (NASDAQ: COST), which saw a 9% sales growth in electronics. Regardless, Cramer said Target's "anemic" 1.4% same-store sales growth is rather "shocking."
Target's stock traded down 7.4% to $115.94 per share at time of publication.
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