The aim raised its fourth-quarter sales forecast on Thursday as more consumers turned to stores and online for holiday shopping — especially on days known for deep discounts.
The retailer now expects comparable sales in the fiscal fourth quarter to rise about 1.5%. That’s better than its most recent outlook that the metric would be roughly flat. Comparable sales include sales on Target’s website and stores open at least 13 months.Â
However, the Minneapolis-based discounter did not raise its earnings outlook — an indicator that provides motivation for buyers. The target expects fourth-quarter earnings per share to range from $1.85 to $2.45 and full-year earnings per share to be between $8.30 and $8.90. Target will report full fourth-quarter earnings results on March 4.
Target cut profit guidance in early November after posting its biggest profit loss in two years and blaming some of its problems on softer sales of discretionary goods and the costs of preparing for a short shelf life port strike in October.
Target’s report is the latest look at a crucial season for the industry. The data so far has suggested it has fared better than expected, but investors have been unimpressed. Lululemon, Abercrombie & Fitch AND American EagleFor example, they all raised their fourth-quarter forecasts on Monday, but shares of some of these companies traded lower that day.
Nordstrom on Friday raised its full-year sales forecast, but only after a previously conservative outlook. And the rival store Macy’s on Monday said its sales will be at or slightly below its low the previously stated range is between $7.8 billion and $8.0 billion.
The industry’s largest trade group, the National Retail Federation, is expected to report its holiday sales summary on Thursday.
Discounts and sales events have remained a important driver of sales as consumers emerge from a more than two-year stretch of high inflation. It’s unclear how much these deals will cut into the profit margins of Target and other retailers, and whether sales will continue to improve if the promotions fade.
In the combined months of November and December, Target said, total sales rose 2.8% and comparable sales rose 2% year over year. Digital sales were up nearly 9% over the previous year’s holiday period.Â
Some of Target’s growth areas contributed to holiday sales. Its subscription service, Target Circle 360, contributed more than 30% year-over-year growth in same-day deliveries in November and December. Sales through the company’s third-party marketplace, Target Plus, grew nearly 50% in that time.
Visitor traffic rose nearly 3% during the two holiday months from the year-ago period, while online and in-person visits increased, the company said. Target said December marked the eighth consecutive month of year-over-year traffic growth.
Target has made aggressive moves to attract selective shoppers. In May, it said it would cut prices on about 5,000 frequently bought items, including diapers, bread and milk. And then it announced another wave of price cuts in October on more than 2,000 items over the holiday season, including cold medicine, toys and ice cream. The company said it would hit more than 10,000 discounted items this year by the end of the holiday season.
In a news release Thursday, Target said Black Friday and Cyber Monday saw record sales. The company said discretionary categories, particularly apparel and toys, saw a “significant sales acceleration” compared to the fiscal third quarter. These categories tend to have higher margins than essentials like milk and paper towels, but often go on sale during the holiday season.
In remarks at NRF’s annual “Big Show” conference Monday, Target Chief Operating Officer Rick Gomez said the company saw a sharp increase in sales on promotional days such as Circle Week, an event in early October that coincided with Amazon Prime Day.
“It was one of our biggest district weeks that we’ve ever had,” he said. “But sales before the week and sales after the week were lower. There was a drop in sales. The customer was very intentional.”
He said American consumers are “working on a budget” but are still willing to splurge on special occasions like holidays or on a “must-have item”. For example, the retailer sold almost 1 million copies of Taylor Swift’s “The Eras Tour” hardcover book, he said.
On Thursday, Target also announced several changes to its leadership team that will begin to take effect in early February. Store chief Mark Schindele will retire after 25 years at Target and will be replaced by Adrienne Costanzo, who is currently senior vice president of store operations.
Chief Information Officer Brett Craig is retiring after 15 years with Target and will be replaced by Prat Vemana, the company’s chief digital and product officer. And Sarah Travis will become the company’s chief digital and revenue officer, a new leadership role, after serving as senior vice president of Roundel, Target’s advertising and social commerce business.
Target recently got a new chief financial officer: Jim Lee, the former vice chief financial officer of PepsiCo, who took the role in late September. He succeeded Michael Fiddelke, who is now Target’s chief operating officer.Â
Target is also on track for a leadership change at the top of the company. In the fall of 2022, longtime Target CEO Brian Cornell agreed to stay on for three more years in a move that required the company’s board to drop its retirement age. Target has not yet announced when his contract ends and who will be his successor.Â
