Big Tickets Dip at Target in Holiday Letdown

Sales during the holiday season underperformed internal expectations at Target Corp., interrupting strong momentum at the Minneapolis-based retailer and signaling tough times could be ahead for other brick-and-mortar retailers.

“After three strong quarters this year and a record-breaking holiday season in 2018, we had some really ambitious plans heading into the season. While we knew this season was going be challenging, it was even more challenging than we expected,” CEO Brian Cornell said in a statement. He called the period “a tough miss, considering how hard our team worked all season long.”

Target in November said it was anticipating same-store sales in the range of 3% to 4% in the fourth quarter but in an update this week, the company said comp sales in November and December increased by just 1.4%, with the shortcomings in home goods, electronics, toys and hard lines.

Food and beverages were a relative bright spot in the same period, showing 3% comps, or about the same pace they showed in the third quarter. Store traffic provided most of Target’s comp figure, indicating that more shoppers eschewed big purchases such as electronics during their visits. The Minneapolis-based retailer’s digital sales increased by 19% in the holiday period, with three-quarters of that growth fueled by same-day fulfillment services, including Drive Up and Shipt, which increased 50% vs. the same period a year ago, indicating customer convenience was still key.

Target’s fourth quarter began Nov. 3. It will report full quarterly results in February, and said it now expects quarterly comps around 1.4%. The company said its earnings expectations for the period were unchanged despite slower sales.

The results were surprising inasmuch as Target had been outperforming peers for more than a year, and so its struggles could signal a broader softening of sales at brick-and-mortar stores, despite favorable U.S. economic conditions. Target in last year’s fourth quarter showed comp gains of 5.7%.

Schindele to Succeed Potts as Chief Stores Officer

In the same release, Target said EVP and Chief Stores Officer Janna Potts was retiring after 30 years with the company and would be succeeded by Mark Schindele, effective immediately. Target said Potts played a critical role as the lead architect in the successful rollout of a new operating model for Target's nearly 1,900 stores, enhancing the retailer’s focus on guest services and fueling the growth of its digital business through a suite of convenient store-based delivery and pickup options. Potts will remain with the company in an advisory role until May 1.

Schindele has been with the Target for nearly 20 years, most recently as its SVP of properties. In that role, he was responsible for leading the remodel and small-format strategies, elevating the shopping experience and introducing Target to new guests in densely populated areas. Prior to that, Schindele held leadership positions in merchandising, sourcing and operations.

“Over the course of her 30 years with the company, Janna has made many significant contributions, including transforming the role our stores play in delivering for our guests in this new era of retail. We wish her the best as she prepares for retirement,” said Cornell. “As we look ahead, I'm confident Mark brings the right set of diverse experiences to realize even more potential for Target. His passion for retail, Target and our team, coupled with his understanding of our end-to-end business, make him well-positioned to lead our stores organization into 2020 and beyond.”

Additionally, the retailer announced that it is formalizing the interim structure it announced for its merchandising organization in October with the appointment of Christina Hennington to EVP and chief merchandising officer, hard lines, essentials and capabilities; and Jill Sando to EVP and chief merchandising officer, style and owned brands, effective immediately. Both Hennington and Sando will join Target's leadership team. This structure reflects the size, scale and complexity of Target’s multi-category commercial businesses and operations. In their roles, Hennington and Sando will collaborate closely with Stephanie Lundquist, Target's EVP and president of food and beverage, on the development and execution of a unified merchandising strategy for the retailer.

“Christina and Jill are seasoned leaders and incredibly talented merchants, and during their respective tenures, both have driven outstanding outcomes that compel guests to choose Target,” said Cornell. “The appointments we're making today with Mark, Christina and Jill underscore the expertise and deep bench of talent we continue to develop at Target, and I have every confidence in their ability to create opportunities that will fuel future growth for our company.”