Target stocks collapse as Christmas sales fail to estimate weaknesses in toys and electronics

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<pre><pre>Target stocks collapse as Christmas sales fail to estimate weaknesses in toys and electronics

The target for Christmas retailers was expected to stand out, but the large box retailer reported disappointing results on Wednesday.

His stocks fell 7% on the news. Walmart, which reported no vacation results, also fell 1.8%.

The goal was that store sales increased only 1.4% in November and December, compared to 5.7% growth in the previous year.

The company announced that despite a failed brand, it is maintaining an earlier outlook for fourth quarter earnings. It also means that the last three months of 2019 remain on the right track to mark the eleventh consecutive quarter with sales growth in the same business.

Target said it had found strength in apparel and beauty, while weak performance in key vacation categories such as electronics, toys, and parts of the retail business offset this growth.

Brian Cornell, CEO of Target, said Target "faced challenges in key seasonal commodities throughout November and December." "However, due to the consistency of our business model, we are sticking to our forecast for earnings per share for the fourth quarter."

"Although we knew this season was going to be a challenge, it was even more challenging than expected," added Cornell in a separate blog post.

Especially this Christmas season, Target should be a winner in the toy category. After the liquidation of Toys R Us, the company reserved more space in stores for toys. It has partnered with Disney to open mini Disney stores in certain Target stores. Target now also operates the website of the Toys R Us brand, which was restarted after the bankruptcy.

But this Christmas season, Target said, toy sales were roughly the same as last year. However, the company said it continued to gain market share in toys during the holidays, based on tracking data provided by the NPD Group.

Target sales of electronics decreased more than 6% in November and December, while household goods sales decreased about 1%. Apparel sales increased by approximately 5%, cosmetics sales increased by approximately 7% and food and beverage sales increased by approximately 3% during the holiday season, according to the company.

In the retail industry, sales of electronics and home appliances increased 4.6% from November 1 to December 24, while furnishings sales increased 1.3% after a separate analysis of Mastercard Spending Pulse purchases. The company said the apparel category grew only 1%, while department store chains saw a 1.8% drop in total sales.

A customer pushes into a Target Corp. store on Thursday, November 28, 2019. in New York State a shopping cart with soft toys.

Bess Adler | Bloomberg | Getty Images

Target's digital sales grew 19% thanks to the fact that more people use street-side pickup options on the same day when shopping online. Target said that on the same day in November and December, the use of its services increased by more than 50% compared to 2018, which accounted for about 75% of the retailer's overall digital sales growth this past Christmas.

Target now expects fourth quarter sales of the same business to decline in line with the 1.4% growth in November and December, compared to a previous 3% to 4% growth. This means that sales in the same store should increase more than 3% throughout the year. The same category of retail sales is a key metric used by retail to track purchases in stores that have been open for at least 12 months.

According to a survey by Refinitiv, analysts demanded a 3.8% increase in sales for Target in the same business in the fourth quarter.

"Our fourth quarter performance will benefit from productivity improvements in our stores and supply chain, and significantly lower inventory levels compared to last year," said Cornell in the press release.

Target's announcement may have come as a shock to some as retailers were largely expected to have a strong Christmas season, while mall-based retail chains and department store operators were struggling.

Macy's, J.C. Penney and Kohl's reported sales declines in the same store for the holidays. Kohl has explicitly described the women's clothing business as the weakest link. And Target showed in its last business quarter that clothing sales are on fire.

While the leggings manufacturer Lululemon reported a strong Christmas season, others such as Victoria's Secret owner L Brands and the discount chain Five Below contributed to the discomfort.

Thanks to investments in new brands such as Good & Gather, store remodels and updates for mobile apps, analysts have found that Target has lost market share to the weakening competitors. The Minneapolis-based retailer increased its annual earnings per share outlook to $ 6.25 to $ 6.45 in November.

While Christmas sales for key general commodities increased by a meager 0.2% in 2019 compared to 2018, there were "clear winners" according to the weekly POS data collected by The NPD Group. The company overall called the vacation results "lackluster", in part due to the fact that companies were doing business earlier in the year, reducing the importance of historically important days like Black Friday.

The Christmas season also had six days less from Thanksgiving to Christmas this year than last year, which makes for the shortest possible calendar. Many retailers said that the calendar started their promotions earlier, hoping to attract customers ahead of their competitors.

Cornell had said about Christmas in October: "Every day will count."

On Wednesday, he said, during this Christmas season, Target noticed that people "shop more conveniently later in the season." Target said its employees prepared almost five times the number of roadside pickup products on December 24, compared to the same day in 2018.

The company also announced on Wednesday that its managing director, Janna Potts, is retiring and will be replaced internally by Mark Schindele with immediate effect.

Changes to his merchandising team have also been announced – with immediate effect Christina Hennington has been appointed Executive Vice President and Chief Merchandising Officer for Hardlines, Essentials and Skills, and Jill Sando has been appointed Executive Vice President and Chief Merchandising Officer for Styles and Target's own brands ,

Mark Tritton, former Chief Merchandising Officer of Target, stepped down late last year to take over as CEO of Bed Bath & Beyond.

Target, which has a market value of approximately $ 63.6 billion, has seen its stocks rise by more than 82 percent in the past twelve months. The stock hit an all-time high of $ 130.24 on December 20.