What does Target’s Christmas miss mean?

Discussion
Photo: Target
Jan 16, 2020
George Anderson

The 2019 holiday selling season was supposed to be strong for retailers, with the usual suspects — Amazon.com, Best Buy, Costco, Target, Walmart, et al — expected to outperform the industry as a whole. That’s what made Target’s announcement of good, not great, results for holidays surprising to industry watchers and analysts.

The retailer reported that same-store sales were up 1.4 percent for the season, below the chain’s forecast of three to four percent growth and well below 2018’s 5.7 percent comp performance. 

“After three strong quarters this year and a record-breaking holiday season in 2018, we had some really ambitious plans heading into the season,” wrote Target CEO Brian Cornell on a company blog. “While we knew this season was going to be challenging, it was even more challenging than we expected. On the topline, our comparable sales grew 1.4 percent, reflecting 19 percent growth in digital, which was below our guidance — a tough miss considering how hard our team worked all season long.”

In a separate statement, Mr. Cornell pointed to weakness in “key seasonal merchandise categories” — specifically electronics and toys — as contributing factors in Target’s holiday results. Some of the retailer’s home assortment also came up short. 

The chain’s electronics sales were down six percent over the last two months of the year compared to a 4.6 percent gain for the category reported by Mastercard Spending Pulse, CNBC reports. This last figure includes major appliances, a category in which Target does not compete. 

The retailer also reported that its toy sales were flat across November and December. Mr. Cornell did maintain, citing NPD Group numbers, that his company gained market share of the category despite falling short of its own sales target. 

On the positive side, Target reported a seven percent gain in its beauty sales and a five percent increase in apparel. Even food, an area of relative weakness for the chain, increased three percent.

The retailer maintained its earnings guidance for the year.

DISCUSSION QUESTIONS: What do you make of Target’s sales miss during the 2019 holiday selling season? Do you see consumer electronics and toys as areas that Target needs to fix or are recent sales trends indicative of the relative strength/weakness of those categories overall?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"This is not a catastrophic situation for Target, just a reminder that we are in a challenging retail environment right now. "
"Not a surprise here. You saw pretty significant markdowns in electronics and toys before the actual season started. "
"Every retailer will have a “hiccup” from time to time. They are still adhering to their full year guidance. Target will be just fine."

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22 Comments on "What does Target’s Christmas miss mean?"


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Mark Ryski
BrainTrust

Target has been a recent darling of the retail industry and Wall Street, delivering great results. What these holiday results make clear is that, even the best retailers have their challenges. Yes, Target does need to focus on fixing the categories where they saw softness, but otherwise they should continue to execute as they have been. It’s such a fine line between success and failure the margin of error is very thin. I wonder what this may be foreshadowing for the year ahead.

Bob Phibbs
BrainTrust

Disappointing yes but not a catastrophe. Their strategy is sound. Face it Target and Walmart have figured it out, Amazon.

Richard Hernandez
BrainTrust

Not a surprise here. You saw pretty significant markdowns in electronics and toys before the actual season started. Walking Target stores, there seemed to be a lot more holes or out-of-stocks this season than last. The markdowns continued after the season was over as well.

Neil Saunders
BrainTrust

The soft numbers are disappointing but they’re not disastrous. The two-year stack of growth is still impressive and in many categories, like apparel and beauty, Target is still driving good growth.

The misses in electronics and home are largely a function of a late Black Friday which deterred some shoppers from buying. Target could have done more to drive promotions, but given electronics is low margin the soft sales is not too detrimental to the bottom line.

In short, Target remains on track and has more growth to come.

Jeffrey McNulty
BrainTrust

I completely agree with you, Neil. The misses are in low margin categories and they had positive growth in beauty and consumables.

Paula Rosenblum
BrainTrust

It’s not overwhelmingly alarming, but I suspect Walmart is gaining at Target’s expense. As Walmart’s reputation improves, there are shoppers that may switch based on a pure price play.

Kenneth Leung
BrainTrust

Walmart and Best Buy for electronics. It is going to be a dogfight between Walmart and Target and Amazon for the price sensitive crowd in the foreseeable future. The question I think is where the rest of the consumers go, especially for higher margin items.

Kathleen Fischer
BrainTrust

This is not a catastrophic situation for Target, just a reminder that we are in a challenging retail environment right now. As a shopper, I noticed more holes on the shelves this season which may point to some areas where Target can look to improve.

Jeff Sward
BrainTrust

Based on the category breakdowns we may be seeing a growing comfort for e-commerce shopping in some areas versus a preference for brick-and-mortar shopping where actual fit and feel are important. That will be a market issue, not just a Target issue. So congratulations to Target for strong performance in areas where the customer gravitates to in-store shopping.

Michael Terpkosh
BrainTrust

A one quarter sales miss is not a trend. However, we will see what happens next quarter. I expect Target will maintain on their current strategic course until they see a soft sales trend over multiple quarters. No doubt they hit some headwinds during the holidays. Toys were flat this year after a big gain last year with the closing of Toys “R” Us. Electronics sales were down partially because Target did not play the deep discount game like Best Buy and Walmart. (Maybe Target made better margins on their sales). It does appear Target is doing well in many other departments, including food.

April Sabral
Guest

I shopped a Target most recently when in the U.S. for the holidays and was happy with the overall selection where they delivered positive results, so I think they have a good strategy around apparel which is hard to compete with these days. I think the results are strong considering the overall trend in retail brick and mortar right now. I am not concerned. It’s also nice to hear Mr. Cornell recognize the hard work of all involved.

Lisa Goller
BrainTrust

It’s a temporary setback for Target.

Positive signs include Target’s strong performance in its core categories of apparel and beauty, plus bigger than expected gains in grocery.

Other categories always attract intense competition. Best Buy is aggressive in electronics, and Walmart and Amazon have dominated toys since Toys “R” Us’ decline. Target can learn from the holidays and adjust its unique, quality toy assortment to improve the results in 2020.

Meanwhile, Target’s new private label athleticwear line, All in Motion, reflects emerging trends like health and wellness, inclusivity and sustainability. This line will perform well in 2020.

Also, compared to same-store sales declines for Kohl’s, Macy’s, and J.C. Penney, Target is looking good – and looking ahead.

Stephen Rector
BrainTrust

Target was going up against aggressive comps, particularly in toys with Toys “R” Us not being a player for Holiday 2018. The playing field got level set and they were flat on the category – not too bad in a very competitive category. With apparel continuing to be strong, I would say this is a blip and the comps should improve as we go into 2020.

Dick Seesel
BrainTrust

Target’s numbers were okay compared to other retail reports, but we’ll see how they stack up against Walmart. (We already know how well Costco performed by comparison.) The company seems to have a viable strategy, but keep an eye on what the new lead merchant and stores director decide to tackle in 2020 for a clearer idea of what Target needs to fix.

Doug Garnett
BrainTrust

I remain mystified that Wall Street thinks it can make broad, accurate pronouncements on companies like Target based on Holiday numbers. So first, it means nothing important. (Read “The Halo Effect” by Rosenzweig.)

On the other hand, we forget that Target’s story about itself is just that — a story. Within it there are some important truths. But there are also covered up weaknesses.

It might have been that the products available in Electronics and Toys were pretty weak this year — that’s my guess.

At the same time, while Target has a solid strategy not everything will work in that strategy — so they can’t rest on the laurels of some strategic announcements followed by one year of good numbers. Life moves on — even when you’re Target.

Scott Norris
Guest

With the later movie release dates, Star Wars merchandise was probably not as big of a lift as hoped, nor Frozen, despite the aggressive licensing. Target’s toy selection was supposed to include more emphasis on smaller manufacturers and made-in-USA products — they had made a start on it when Toys “R” Us collapsed, but this season it really looked like more of the same from Hasbro, Mattel, Lego, FunkoPop and the other big manufacturers and very few indy lines. (Perhaps due to panicked forward-buying because of Trump’s tariffs?)

There’s a big Cards Against Humanity display on the back wall right now, but at this point that series is also ubiquitous. They need to recommit to identifying and promoting unique lines from emerging and established specialty vendors to demonstrate a different point of view than Walmart.

Ryan Mathews
BrainTrust

There’s no reason to panic … yet. The fact is that in categories like electronics and toys that are critical to holiday success, it’s hard to outsell the Amazons, Walmarts and Best Buys of the world. And that’s probably not going to change too much, too soon. So what that means is that Target needs to pursue strategies that make it less dependent on certain categories and certain periods. If they do that, they should be fine. If they don’t, there may be trouble down the road. But one off season — especially when it wasn’t totally “off” — does not a Retail Apocalypse make.

David Adelman
Guest

I’m a huge fan of Target. Perhaps their forecasts were just too optimistic. However, it’s not always about sales growth in retail. Target has ambitious plans to connect with its customers on a very personal level. For example, the introduction of custom apparel for people with disabilities. These products don’t always help the bottom line, but they do elevate Target’s amazing brand to much higher levels that its competitors.

It’s not always about missing sales targets. Corporations also have to make profit. Sometimes consolidating merchandise assortments reduce sales, but may actually increase a corporation’s bottom line.

Corporations across the Globe must face the new transparency that today’s customers demand. Revenue growth is great but at what cost to the consumer and the environment. This sales miss by Target is simply one quarter. Shareholders must look at the broader long term picture just like their stock market portfolios!

Craig Sundstrom
Guest

OMG! Oh…My…God! Or, really more like, “yawn.” As I’ve commented — lectured? — here repeatedly, single point comparisons don’t mean much, whether they’re for a month, a season or even a whole year.
That having been said, the gap between the reality and the expectation is rather dramatic, so I would say this is maybe a problem. But for the finance department, not the sales staff.

Brian Kelly
Guest
1 month 1 day ago

Context: There is doubt and head scratching around the Mastercard 3.5% lift with so many brands flat or decomping. We have yet to hear WMT Holiday ’19 number.

Re: the economy: The high tide is not floating all boats. US minimum wage remains at $7.50. For those retailers with a high share of store portfolio in exurb/rural areas, decomping will be the trend.

Read the local paper coverage from the markets in which Macy’s announced store closures. “Wrong merchandise” and “too highly priced” are the common comments.

A new book on the topic joins a full bookshelf: “Tightrope”.

We have a problem. Retail sales are a canary in the coal mine.

Jeffrey McNulty
BrainTrust

I am not concerned at all. Target is a Best in Class retailer who is trending in the right direction. They have focused heavily on logistics, infrastructure, employee training, proprietary brands, and curated offerings and it is paying dividends.

Every retailer will have a “hiccup” from time to time. They are still adhering to their full year guidance. Target will be just fine.

Morgan Linton
Guest

I don’t think Target’s holiday numbers were as much of a miss; instead this just reflects the challenges that every major retailer has as competition continues to grow online. As more consumers move to online shopping channels, price sensitivity grows as does shipping time and reliability. Target has done a great job scaling online but it’s hard to ignore the leverage Amazon has with Prime.

Target is still executing well and posting good numbers, the key will be differentiating themselves to consumers so that a customer would rather buy from Target than anywhere else, and that will take more time and likely increased innovation on their side to truly give them an edge.

wpDiscuz
Braintrust
"This is not a catastrophic situation for Target, just a reminder that we are in a challenging retail environment right now. "
"Not a surprise here. You saw pretty significant markdowns in electronics and toys before the actual season started. "
"Every retailer will have a “hiccup” from time to time. They are still adhering to their full year guidance. Target will be just fine."

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