Clean inventory to prove costly

Same-store sales at Target during December were in negative territory, and while that is never good, the numbers were better than analysts expected, and also at the low end of the company’s guidance.

Same-store sales declined 4.1%, but that figure was substantially better than the 8.8% decline analysts expected, and within the company’s guidance provided in early December that called for a decline in the mid-single to low double digits.

“The decline in our December comparable-store sales was in line with our planned range, reflecting stronger results in the last two weeks of the month,” said president and CEO Gregg Steinhafel.

The acceleration in sales trends came as a result of markdown activity, which Steinhafel indicated would affect profits when fourth-quarter results are announced next month. “During the month, we reduced prices to gain market share and to end the year with very clean inventories. These markdowns, combined with additions to our accounts receivable allowance, will put additional pressure on our profitability in the fourth quarter,” Steinhafel said.

Even so, there is something to be said for entering the spring selling season with inventories in good shape and newness on the sales floor. “We continue to focus on appropriately balancing short-term tactics with long-term strategy in ways that will preserve our brand, deliver a superior guest experience and fuel Target’s continued success,” Steinhafel said.

Total sales for December increased slightly by 0.2% to nearly $9.3 billion.