Target’s latest prototype format. File photo. (Image provided by Target)
MINNEAPOLIS – There were a few bright spots in home at Target during the third quarter, but not enough to keep the category from generating the steepest comp decline across the business.
Same-store sales in home were down in the mid-single-digit range. Apparel comp was also down, but less than 1% during the quarter ended Nov. 2. In both categories – Target’s two highest-margin product segments – comp decelerated by about 4 percentage points compared to Q2.
All other categories generated positive comps.
Rick Gomez, EVP and chief commercial officer pointed out that home is facing challenges across the retail industry.
“We’re not happy with where we are,” he told analysts during this morning’s Q3 investor call.
Better performers included Hearth & Home by Magnolia and the Threshold with Studio McGee collaboration. In hardlines, décor refresh items such as picture frames, candles and vases sold well, he said.
“We saw several strengths across the [company-wide] business, including a 2.4% increase in traffic, nearly 11% growth in the digital channel, and continued growth in beauty and frequency categories,” said Brian Cornell, chair and CEO of Target Corporation.
Although traffic improved, that decline in average ticket cost mostly offset growth as consumers continued to spend selectively, especially in discretionary categories.
While Target shoppers responded well to special events and promotions, they held back otherwise. For example, the Target Circle Week event in early October prompted 3 million new enrollments in the program. However, Target saw pronounced sales dips the week before the event and the week after.
Total company comp came in at the low end of expectations. Same store sales rose just 0.3%, pulled down by a comp store decline of 1.9% despite a digital sales increase of 10.8%.
Total revenue of $25.7 billion in the third quarter was 1.1% higher than last year, reflecting a slender retail sales increase of 0.9% and an 11.5% jump in other revenues. Third quarter operating income of $1.2 billion was 11.2% lower than last year.
“We know the home category will rebound in time,” said Cornell.
In the meantime, the company has to make sure it doesn’t run ahead of the consumer in any category of business, he noted.
“We’ll plan cautiously and look for green shoots,” he added.
The disappointing results prompted Target to lower its full-year earnings guidance – just months after raising it based on Q2 performance. The company now expects GAAP and Adjusted EPS range of $8.30 to $8.90, which falls at the low end of the original guidance Target issued in March.
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