Target got a lump of coal in its stocking this holiday season: The cheap-chic discounter's November/December 2016 comp-store sales fell 1.3%. (Photo credit: MARK RALSTON/AFP/Getty Images)
When Macy’s, J.C. Penney and Kohl’s reported disappointing holiday results, some tried to spin it as a department store problem.
Now here comes discounter Target, which posted an eyebrow raising sales decline for the make-or-break selling period: November and December comp-store sales fell 1.3%.
Houston — uh, retail, we’ve got a problem. And Target is just one of many stores that got coal in its stocking this holiday season.
“Of the [40-plus] retailers that have announced holiday sales so far, two-thirds have missed their expectations," said Joe Feldman, managing director of Telsey Advisory Group, at a press briefing during the National Retail Federation’s Big Show this week in New York City.
No doubt there’s a disconnect between what’s been called retail’s best holiday season since 2011 — fueled in part by spend-happy shoppers nudged by wage growth and low gas prices — and the poor showing by the nation’s largest chains, noted economists and analysts at the show.
And while wage growth “will be the main driver of personal income growth, which will push up consumer spending in 2017,” according to Yelena Shulyatyeva, senior U.S. economist at Bloomberg L.P., that likely won’t do much good for retailers, if the holiday numbers are any indication of what lies ahead.
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Retail's problems are more intractable. One big culprit is reflected in Target CEO Brian Cornell’s statement on what went wrong, and points to what I’ve started to call retail’s enemy within: The online business, the cost of which is bludgeoning their bottom lines.
Target’s digital sales transactions over the holiday period surged more than 30%. But "while we significantly outpaced the industry's digital performance, the costs associated with the accelerated mix shift between our stores and digital channels and a highly promotional competitive environment had a negative impact on our fourth quarter margins and earnings per share,” Cornell said in the statement.
Like many of the nation’s legacy retailers, Target is on a tear to makeover its supply chain to both serve its increasingly multichannel shoppers and turn a profit, which is proving to be a tricky task for many.
Product-wise, Target’s weak consumer electronics showing, with comparable sales falling in the high single digit range, is disconcerting, as the category is a big holiday gift purchase.
But the results are not a complete surprise.
Target has been struggling with the category. And that’s why the chain expanded its tech services program beyond mobile devices in time for the holidays, so that Target Mobile reps became Target Tech reps in more than 1,500 stores, able to assist guests with all electronics.
And for the holidays, it bet big on gift items such as the Series 2 Apple Watch and voice-activated speaker Google Home, building on the hot connected home category, executives said at a holiday press preview back in October.
"Unemployment is low, fuel prices are low," as are food prices, Cornell said at the preview, setting the stage for "a good holiday season." It didn’t happen.
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