Target’s holiday sales are stronger than expected

US discount department store chain Target has raised its quarterly profit and sales forecasts, after a better than expected festive trading period.

Comparable sales growth of 3.4 percent in the November/December period was driven by strong traffic growth and continued strength in digital sales, which are expected to grow more than 25 percent in 2017.

Stores fulfilled 70 percent of Target’s digital volume in November/December, meaning that stores enabled approximately 80 percent of the company’s comparable sales growth in that period.

“As we look ahead to 2018, we will build on the foundation we established this year by launching additional exclusive brands, enhancing our digital capabilities, opening approximately 30 small-format stores and tripling the size of our remodel program to more than 325 stores,” said Brian Cornell, chairman and chief executive officer of Target Corporation.

While Target’s holiday growth is respectable and makes it a holiday winner, GlobalData Retail managing director Neil Saunders prior year comparatives – when same-store sales fell by 1.3 per cent – are very weak and since that time Target has undertaken a raft of initiatives that should have boosted performance.

“All that said, the growth does indicate that Target is on the right track and that it’s various ventures are starting to pay dividends. However, we believe that it also highlights some deficiencies in execution – especially in stores.”

“Target’s holiday focused Wondershop is another example of a lost opportunity. Like last year, Target’s range of holiday decorations and sundries was comprehensive and, in our view, one of the best in the market. However, also like last year, Target buried this offer at the back of the store and, as a consequence, lost custom. We note that more effort was made to signpost the collection this year, but this proved to be inadequate.”

Digital was the undoubted success, according to Saunders, with robust online growth underpinning performance.

“Overall, this is a positive outcome. It shows Target is doing the right things and that its ideas have merit. However, it also indicates the need for more care in execution, a faster roll-out of the initiatives, and a greater sense of ambition. Ultimately, Target is doing well, but it could be doing better.”