Target Stock Hammered on Holiday Season Report

When Target Corp. (NYSE: TGT) reported third-quarter results back in November, the company forecast comparable sales growth of 3% to 4% for the fourth. In an announcement Wednesday morning, the company said comparable sales for the November-December holiday shopping season rose by just 1.4% and that, based on that number, fourth-quarter comparable sales are now expected to rise by 1.4%.

Holiday season sales of electronics gear fell by more than 6%, while toy sales were “approximately flat” with sales during the 2018 holiday season.

The company said that comparable sales growth was driven by higher foot traffic and a “small increase” in the average ticket. Comparable digital sales rose by 19%, driven primarily by the company’s same-day fulfillment services, which together grew more than 50% from the same period last year.

CEO Brian Cornell tried to boost investors’ spirits:

We faced challenges throughout November and December in key seasonal merchandise categories and our holiday sales did not meet our expectations. However, because of the durability of our business model, we are maintaining our guidance for our fourth quarter earnings per share. We also remain on track to deliver historically strong full-year results in 2019, including comparable sales growth of more than 3 percent and record-high EPS reflecting mid-teens growth compared with last year.

Target had forecast fourth-quarter adjusted EPS in a range of $1.54 to $1.74 and full-year EPS at $6.25 to $6.45. Analysts were expecting quarterly EPS of $1.70 and full-year EPS of $6.39. Analysts’ estimates were close to the high-end of Target’s forecast and investors appear to expect those estimates to be adjusted downward given the holiday season report.

If Target’s comparable fourth-quarter sales do meet the revised 1.4% growth forecast, full-year comparable sales will rise by more than 3%, the company said.

Target’s share price nearly doubled in 2019 but has drifted downward in the first weeks of the new year. In Wednesday’s premarket session, the stock traded down more than 9% at $113.76, after closing Tuesday at $125.26, in a 52-week range of $67.17 to $130.24. The consensus 12-month price target on the stock is $136.33.