A long, hot summer for Target

July proved to be another challenging month for Target with same-store sales down 6.5%, as once again the company experienced fewer transactions that were smaller on average than the same month the prior year. August promises to be just as tough, due to ongoing difficult economic conditions combined with a Labor Day holiday which falls a week later this year and will push some seasonal sales into September.

Although the July comps were in line with the company’s guidance, a 6.5% decline is still disappointing, especially since it comes on top of a 1.2% decline last year. But that’s been the trend at Target this year, as the company continues to struggle with the perception that its stores are not price competitive, even as consumers reign in spending on discretionary product categories. The company has numerous merchandising and marketing initiatives in place to better demonstrate and communicate value, but, until those efforts take hold, at least gross margins are improving and expenses are under control. Even the company’s credit card business is looking better as risk trends are said to be improving indicating more people are paying their bills on time and are less likely to default.

As has been the case in past months, Target produced its best results in such categories as health, beauty and food, while such discretionary areas as home and apparel were the worst performers. Same-store sales in apparel declined in the high single-digit range, while home sales declined in the low double digits.

The opening of 23 new stores midway through July boosted Target’s U.S. stores count to 1,719 units.