MINNEAPOLIS — Joe Namath he’s not. Target chairman, president and CEO Gregg Steinhafel assured investors last month that December comps would exceed November’s 1.8% increase, but then Thursday morning reported a disappointing 1.6% increase and a reduced profit forecast.
Namath, the former New York Jet’s quarterback, famously guaranteed victory over the heavily favored Baltimore Colts in Super Bowl III and then delivered on his guidance with a stunning 16-to-7 victory. Conversely, Target’s failure to live up to Steinhafel’s guarantee that fourth-quarter comps would be in a low-to-mid single-digit range, but above November’s 1.8% gain, caused the company to significantly reduce its fourth-quarter earnings-per-share forecast to a range of $1.35 to $1.43 from $1.43 to $1.53. The company did stick with a January comps forecast in the low-to-mid single-digit range, the same as in December and November. What makes Target’s December results even more disappointing is the company was up against a relatively easy prior-year comparison when comps increased just 0.9%. The 1.8% gain in November, also regarded as disappointing at the time, was at least a little more understandable as it came a against a prior-year comparison of 5.5%.
“December sales were below our expectations as growth in grocery and beauty offset softness in electronics and music, movies and books,” Steinhafel said. “Sales and traffic were strongest in the week leading up to Christmas as guests waited to shop for last-minute gifts. In 2012, we’ll continue to pursue initiatives designed to deliver compelling value and a superior shopping experience against the backdrop of continued slow and volatile economic growth.”
If there was a bright spot amid the company’s December showing, it was the fact that the majority of the growth the company experienced was driven by an increase in average transaction size, which suggest loyalty among core customers. Steinhafel also took the high road by not offering weather conditions as an excuse for sales weakness, even though unseasonably warm conditions are believed to have negatively impacted Target and other retailers.
Additionally, the company noted that December comps in food increased in the low teens, while comps in household essentials increased in the mid-single-digit range, with the strongest performance in beauty. Comps in apparel and accessories increased in the low-single-digit range, with the strongest performance in kids’ apparel and the intimate, hosiery and performance categories. The softest performance was in jewelry and accessories and shoes. Comps in hardlines decreased in the low-single-digit range, with the strongest performance in toys and the softest performance in electronics and music, movies and books. Comparable-store sales in home furnishings and decor decreased in the low-single-digit range, with the strongest performance in seasonal categories and the softest performance in decorative home.