Target’s sales rose 1.4% between Nov. 1 and Dec. 31 in stores and through digital channels operating for at least 12 months, the company said. It warned that growth for the full quarter, which includes January, would likely come in less than half the 3% to 4% growth it had predicted.
“We faced challenges throughout November and December in key seasonal merchandise categories and our holiday sales did not meet our expectations,” Chief Executive Brian Cornell said.
The company cited weak sales of toys and electronics, two categories that are big sellers during the gift-giving season. The Minneapolis-based chain also said Wednesday it was appointing a new executive to oversee its fleet of roughly 1,800 stores.
Shares of Target fell about 8% in premarket trading. The stock nearly doubled last year and closed Tuesday at $125.26, near all-time highs. While other traditional retailers have reported lackluster holiday results, Target has been held up as one of the chains that adapted to shifting consumer habits by ramping up its e-commerce operations and remodeling its stores.
Digital sales rose 19% in November and December compared with a year ago, down from 31% growth in the third quarter. The company has tried to drive such growth by offering free shipping on all orders placed on its website during the holidays and rolling out a variety of home-delivery and store-pickup services.
Sales at Target have been robust in recent quarters, aided by a turnaround plan that included adding more in-house brands, remodeling stores and cutting prices while spending more to grow online and offer fast home delivery. Mr. Cornell announced the turnaround plan in 2017 after reporting weak holiday sales that season.
The company had boasted a streak of eight consecutive quarters of at least 3% sales growth, including a 4.5% jump in the quarter ended Nov. 3. In November, Mr. Cornell said the company was gaining market share in the apparel, home and beauty categories. “We are starting to see the bifurcation of winners and losers” in retail, he told analysts a week before Black Friday.
Target said Wednesday it continued to post strong sales growth in most of those categories, but they weren’t enough to offset flat toys sales and a 6% drop in electronics sales as well as weak sales in some home categories.
The company is maintaining its profit targets, in part because the categories with stronger sales earn high margins. For the fourth quarter, Target expects adjusted earnings per share of $1.54 to $1.74 and full-year adjusted earnings per share of $6.25 to $6.45.
Several other retailers have reported sluggish holiday sales recently, but those have mostly included department stores and specialty chains that entered the holiday season on weak footing. Macy’s Inc., J.C. Penney Co., Kohl’s Corp. and Victoria’s Secret parent L Brands Inc. all reported lower sales in the critical months of November and December.
Thus far Costco Wholesale Corp. is a lone bright spot, reporting comparable sales up 9% in the five weeks ended Jan. 5, including e-commerce and international sales.
The two biggest U.S. retailers, Walmart Inc. and Amazon.com Inc., haven’t detailed their holiday results. Amazon said the day after Christmas that it set a record for orders in the season and noted strong demand for toys, fashion and electronics but didn’t provide sales data.
Walmart, the country’s largest retailer by revenue, is slated to release fourth-quarter results on Feb. 18.
Overall, the strong U.S. economy, low unemployment and rising wages boosted retail sales last year, government data show. But much of the growth is coming from e-commerce, not store visits. Online sales rose 18.8% from Nov. 1 through Christmas Eve, compared with growth of 1.2% for in-store sales, according to Mastercard SpendingPulse.
On Tuesday, market researcher NPD Group said holiday results were lackluster, estimating that total sales rose 0.2% compared with the previous year. The decline in the number of items sold was greater than the drop in dollars spent, NPD said, a sign that consumers gave higher-priced gifts this holiday.
On Wednesday, Target said its chief stores officer, Janna Potts, will retire and be succeeded immediately by another company veteran, Mark Schindele.
Ms. Potts, a 30-year Target employee, took over as stores chief in January 2016. She will stay in an advisory role until May 1.
Mr. Schindele, who has worked at the company for nearly 20 years, was most recently responsible for remodeling stores and rolling out smaller-format stores in urban areas.
The company also promoted two executives to permanently fill the role vacated in early November when Mark Tritton resigned as chief merchant to take over as CEO of Bed Bath & Beyond Inc. Christina Hennington and Jill Sando will serve as chief merchandising officers.
Write to Sarah Nassauer at [email protected]