Target’s Strong Holiday Sales Boost Hopes for Best U.S. Shopping Season in Years

(Bloomberg) -- Target Corp. set a high bar for rival retailers with strong holiday sales, bolstering the industry’s hope that this will be America’s best shopping season in more than a decade.

  • Target’s comparable sales grew 5.7 percent in the November-December period, beating some analysts’ estimates. It also maintained its full-year sales and earnings forecasts.

Key Insights

  • Target went all out over the holidays to grab former Toys “R” Us shoppers, by expanding toy sections and almost doubling its range of new or exclusive products. The gambit worked, as sales of toys were among its best-performing categories.
  • Its other big holiday gamble -- offering free two-day shipping on most items with no minimum purchase -- was an effort to blunt the appeal of Amazon’s Prime program. The move helped boost digital sales 29 percent, yet could hurt profitability when Target reports full fourth-quarter results March 5. Investments to bolster the digital business have weighed on margins for several quarters.
  • Target also said its finance chief Cathy Smith would retire after less than four years on the job. 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.
  • The company didn’t provide sales or earnings guidance for 2019, saying only that it expects to “deliver profitable growth throughout the year.” Retailers are bracing for a slowdown in consumer spending as interest rates rise and some high-income earners get more cautious. Still, tax refunds could help extend the boom into 2019, according to Wells Fargo & Co.

Market Reaction

  • Target shares were little changed in premarket trading.

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