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Why Target's holiday letdown 'is like getting an A instead of an A+'

Sarah A. Smith
Segment Producer/Booker

The 2019 holiday season was not as “merry and bright” for Target (TGT) as the company might have liked, but at least one retail expert thinks it’s not nearly as bad as investors think. 

The retailer’s stock tumbled on Wednesday after it reported same-stores sales gained a slim 1.4% during the holiday shopping season, slowing from a growth rate of 5.7% the year prior. The company blamed weaker-than-expected holiday sales on key categories like electronics, toys and home goods. 

Despite that flat performance, retail expert Erin Sykes told Yahoo Finance she thinks “Target is fundamentally very strong.” Target, which was Yahoo Finance’s 2019 company of the year, is still “one of the top three retailers” as far as Sykes is concerned. 

“This little blip during the holiday season is like getting an ‘A’ instead of an ‘A+’ on your math test back in sixth grade,” Sykes told YFi PM. “They're still really winning.”

She argued Target is “making all the right moves in terms of meeting the customer where they are,” pointing to the retail giant’s push into digital sales, which are up 19% from a year ago.

A Target employee hands bags to a customer at the register at a Target store in Colma, Calif., Friday, Nov. 23, 2012. Black Friday, the day when retailers traditionally turn a profit for the year, got a jump start this year as many stores opened just as families were finishing up Thanksgiving dinner. Stores are experimenting with ways to compete with online rivals like Amazon.com that can offer holiday shopping deals at any time and on any day. (AP Photo/Jeff Chiu)

“If we look at Walmart (WMT), Target, and Amazon (AMZN), they are the ones winning the retail race,” said Sykes. “I have no hesitation to say that they will continue an upward trend.”

The company is expecting a 3-4% increase in same-store sales in the fourth-quarter, but Target’s move to the downside on Wednesday signals that investors may not be as optimistic.  

However, Target’s holiday sales in its “weaker” categories may not cause for concern. Sykes argued that Target’s shift to a more multi-channel approach — into places like grocery and pickup — has made them more than just a place for consumers to look for toys and electronics.

“As a whole, as a consumer, we're still investing in technology, but if somebody gifted you Disney+ streaming, then that is not necessarily falling into the Target bucket,” explained Sykes.

Sarah Smith is a Segment Producer/Booker at Yahoo Finance. Follow her on Twitter @sarahasmith

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