Waiting for the bounce

It has become increasingly clear in recent months that Target has hit bottom, and some might argue begun the process of rebounding. Evidence of the rebound can be seen in modestly improving customer counts and the sequential improvement in the company’s monthly same-store sales, which declined only modestly (-0.1%) in October. That figure is better than the 1.7% decline in September, which was better than the 2.9% decline in August, which was better than the 6.5% decline in July. So, with Target’s monthly same-store sales getting less worse, November is shaping up as a pivotal test in whether the company’s resurgence is for real, and its same-store sales might actually turn positive for the first time since a 0.3% gain in April that was artificially induced by a shift of Easter. Target executives may be hoping that is the case, but they aren’t ready to publicly declare a resumption of sales growth, especially now that the national unemployment rate has nosed above 10%. Clearly that level of joblessness, not to mention underemployment and wage cuts at other employers is weighing on the spending outlook for November and helps explain why Target is forecasting flat comps even though it faces comparisons against last year’s 10.4% decline.

“We are entering the holiday season with very clean inventories and we believe we are positioned to perform well in what continues to be a challenging economic environment,” said Target chairman, president and CEO Gregg Steinhafel.

Just how challenging remains to be seen, but some additional insight into the competitive climate will be offered this week when Walmart reports third quarter results on Nov. 12 and updates its further quarter sales and earnings guidance.