This could be bad news for US economic growth and the 4th quarter earnings season.
After highflying for 2019, America’s second-biggest retailer, Target was supposed to cap a stellar year with a solid sales performance in the usually buoyant holiday season.
Instead, the retailing giant shocked on the downside with actual growth in comparable-store sales well under company forecasts and the market’s best guesses.
In revealing the sluggish sales performance the Number 2 retailer in the US joined the likes of Macy’s, Kohls and JC Penny in revealing weak holiday sales performances.
Target said same-store sales grew 1.4% in November and December, below market forecasts of 3.7%. Digital sales though did well, with some same-day order and pick up services seeing a 50% plus gain in volumes.
More importantly Target itself had forecast sales growth in a range of 3% to 4%, so the outcome was a shock.
On top of that Target warned that sales growth for the quarter, which includes January, would come in at less than half its forecast for 3% to 4%.
For the year as a whole, the company is looking at comparable sales growth of around 3%, but that will only be due to the strong figures earlier in 2019.
Target shares fell more than 7% on the weak update. That still left them up more than 70% in the past year, although they have had a soft start to 2020 and are down more than 9% (including Wednesday’s losses).
The retailer blamed softer sales of electronics, toys and in some home product categories.
But other areas did well. Target said holiday clothing comparable sales were up 5%, beauty was up 7% and food and beverage were up 3%.
The period from Thanksgiving to the end of the year is the most important for US retailers and the clutch of weak trading updates is starting to suggest that US consumer spending slowed in the closing months of 2019, despite solid job growth and wages.
Consumer spending supported US economic growth for most of 2019 in the absence of a slide in business investment and weak trade data.
If US consumers are becoming more cautious that could be bad news for final quarter growth for 2019 and into the new year.
