More of the same in February
Clean inventories and improving traffic trends suggest Target is off to a solid start to its new fiscal year, even if the company’s share price reacted negatively to news of a 0.5% January same-store sales increase.
Target’s share price took a header last Thursday, dropping more than $2 a share at one point during the day, as analysts’ consensus forecast called for a 1.4% gain. Despite the so-called miss on revenues, a couple of things stood out in the brief commentary from chairman, president and CEO Gregg Steinhafel. For starters, the reason sales weren’t stronger was due to the fact that inventories were well managed going into the holidays so there was less merchandise to mark down and clear in January. That’s a good thing from a profit perspective because it means there were more sales at full price when shoppers were redeeming gift cards. Another notable tidbit from January relates to the fact that Target continues to report improving trends when it comes to customer traffic, suggesting customers who grew skittish when the economy was really sour have begun returning to the fold.
“We experienced strong guest traffic in January and comparable-store sales in both our apparel and home categories were positive for the month,” Steinhafel said. Based on those factors and inventory levels described as “very clean,” Steinhafel expects the company to profitably gain market share, even through the environment remains challenging. A reality reflected in the fact that the company remains conservative with its sales guidance and forecasts a February comp increase in line with January.