Projections calling for a low-to-mid single-digit comp increase at Target during May don’t sound overly aggressive, but when factoring in some of the economic headwinds and uncertainties facing the U.S. economy, the sales plan begins to sound more ambitious.
Consumers are dealing with higher fuel prices, food inflation and lingering unemployment. Where $4 a gallon gas prices are headed next is big unknown, but it is only May and historically prices increase during the summer. Ouch!
In addition to the overarching economic forces confronting all retailers, Target also faces the prospect of a reinvigorated Walmart intent on reversing seven consecutive quarters of same-store sales declines. The company launched a major marketing campaign in mid-April proclaiming it has low prices on everything, and if Target’s April results are any indication it is unaffected so far. The company said its April same-store sales increased 13.1%, which was slightly below expectations calling for a mid-teens increase.
“April comparable-store sales were somewhat below our expectations, as guests continued to be very cautious in their spending leading up to Easter,” according to Target chairman, president and CEO Gregg Steinhafel. “Target remains focused on delivering an outstanding shopping experience, providing unbeatable value on high quality, well-designed items throughout our assortment. This is more important than ever for our guests as they face increasing pressure on their household budgets due to higher energy costs and increasing prices of food, apparel and home merchandise.”
Target’s total sales for the period increased 13.7% to nearly $4.9 billion compared with roughly $4.3 billion during the same month last year. Easter had a huge impact on the company’s results as it did for many other retailers as the holiday fell three week later this year, causing seasonal sales to shift into the April reporting period and, in Target’s case, made for an easy comparison to a prior year comp decline of 5.9%.
As for the potential impact of Walmart’s renewed emphasis on everyday low prices and a major advertising campaign that debuted the week prior to Easter, Target didn’t address the issue specifically but did make it clear that, as has been the case in prior months, more people are shopping its stores and comp growth is coming from food and consumables. The prominence of food and consumables drives shopper frequency and Target made it clear that more than half of its increase in same-store sales was due to growth in same-store transactions with the remainder of the increase resulting from an increase in average transaction size. In addition, the company said its April same-store sales performance was strongest in the grocery category, which experienced a 30% gain while boys and girl’s apparel comps advanced about 20% as did the hardlines category. However, health care and beauty was up in the mid-to-high single digits, while the home category advanced in the low-to-mid single digits.