Target (TGT) said that its same-store sales climbed 5.7% during this past holiday season, topping growth of 3.4% a year ago and surpassing some analysts' expectations. It also announced the retirement of Chief Financial Officer Cathy Smith, in addition to other management changes. Retail stocks as a group have been under pressure this morning after Macy's (M) reported disappointing holiday sales results and cut its profit outlook.
HOLIDAY SALES AND UPDATED GUIDANCE: Target reported a comparable sales increase of 5.7% for the November/December holiday season, above the 3.4% increase it posted last year. The company's holiday results reflected "strong" traffic, positive store comps and comparable digital sales growth of 29%, Target noted. The big box retailer said it expects that 2018 will be the fifth consecutive year in which its digital sales grow more than 25%. CEO Brian Cornell said in a statement that he was "very pleased with Target's holiday season performance, which came on top of really strong results in the same period last year. This performance demonstrates the benefit of placing our stores at the center of every way we serve our guests, including both in-store shopping and digital fulfillment." For the period, Target said its store pickup plus drive up option grew more than 60% from a year ago, accounting for a quarter of the company's digital sales in that timeframe. It added that all five of its core merchandise categories saw SSS growth in November/December and that growth was strongest in toys, baby and seasonal gift items. Target said it continues to expect Q4 SSS growth of about 5%, and, for the full year, continues to expect adjusted EPS of $5.30-$5.50, in line with analysts' current consensus estimates of $5.39. The company did not provide sales or earnings guidance for 2019, saying only that it expects to "deliver profitable growth throughout the year."
CFO RETIREMENT AND LEADERSHIP CHANGES: In conjunction with its holiday sales results, Target announced the retirement of its CFO and a series of leadership changes. CFO Cathy Smith will retire after less than four years on the job, the company said. She will remain in her role until a successor is named. It also named Stephanie Lundquist, its head of human resources, to a new role leading its food and beverage business, while Melissa Kremer will succeed Lundquist as HR Chief. Additionally, Katie Boylan was named Chief Communications Officer, while Chief Information Officer Mike McNamara will now lead the Enterprise Data Analytics and Business Intelligence team, in addition to his leadership of Target's Technology Services. Rick Gomez, Target's Chief Marketing Officer, was named Chief Marketing and Digital Officer and will now lead Target's Digital team.
PEERS: J.C. Penney (JCP) on Wednesday said its comparable store sales for the nine-week period ending January 5 fell 3.5% on a shifted basis, with sales falling 5.4% on an "unshifted" basis. The retailer said it still expects to "generate positive free cash flow in fiscal 2018, reduce inventory in excess of $225M, or 8%, and expects to end the year with liquidity in excess of $2B." Kohl's on Thursday said its sales for the holiday period were up 1.2% compared to growth of nearly 7% during the same period a year ago. CEO Michelle Gass said in a statement the company was pleased with reporting a "very strong holiday" on top of "last year's' exceptional holiday season." She added the retailer saw double-digit sales growth online this past November and December. Macy's said Thursday that its owned plus licensed same-store sales for the November/December holiday period were up 1.1%, with CEO Jeff Gennette saying that the holiday period began strong, but weakened in the mid-December period "and did not return to expected patterns until the week of Christmas." Macy's cut its outlook for FY18, with Gennette noting that "Our revised guidance is above the expectations we set at the start of the fiscal year, and we expect to deliver our fifth consecutive quarter of positive comparable sales, including 'comping the comp' of the 2017 holiday season." In late December, Amazon (AMZN), which has been gaining share from other retailers, said that it had a "record-breaking" holiday season with more items ordered worldwide than ever before. Amazon customers shopped at record levels from a wide selection of products across every department, it said. "This season was our best yet, and we look forward to continuing to bring our customers what they want, in ways most convenient for them in 2019. We are thrilled that in the U.S. alone, more than one billion items shipped for free this holiday with Prime," said Jeff Wilke, CEO Worldwide Consumer at Amazon, said at the time. Target has looked to take on Amazon's Prime program by offering free two-day shipping on most items with minimum purchase.
ANALYST COMMENTARY: Baird analyst Peter Benedict said he remains encouraged by Target's continued robust traffic and sales momentum, which reflects market share gains fueled by a number of top-line initiatives. Benedict reiterated his Outperform rating on Target and said it remains a compelling value idea. Deutsche Bank analyst Michael Baker raised his price target for Target to $80 from $78 citing the retailer's "solid" Holiday comps. The analyst, however, said "some questions remain going forward."
PRICE ACTION: In late morning trading, shares of Target are down 4.1% to $67.42, while shares of most retail peers also remain lower.