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MinnEcon Blog
Martin Moylan

Target Sales Fall Short In Key Quarter

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Sales and profits at Target were disappointing for the three-month period that included the important holiday shopping season.

Target's net income for the quarter ending Jan. 29 fell by about five percent to $981 million. Total revenue rose 3 percent to about $21 billion.

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The retailer says it choose not to be as aggressive as some rivals, such as Walmart, were with price cuts. Target CEO Gregg Steinhafel says the company expected sales at stores open at least one year --a key industry benchmark-- would increase by about three percent. But they only rose by two percent.

"The shortfall was concentrated in the peak of the holiday season, as promotional activity throughout retail was exceptionally intense, and we choose to maintain an appropriate balance between driving sales and profitability," he said.

Target shoppers also made greater use of company-issued credit and debit cards that offer five percent discounts on Target purchases. That narrowed profit margins. The company expects the cards will generate about 12 percent of its sales this year.

Steinhafel said the retailer's performance was hurt by its website, which had speed, navigation and other problems.

"It hurt and the primary timeframe where it hurt the most was really in the November, first couple of weeks of December timeframe," he said. "As we have added fixes to the website, we have seen our business on the dot-com site continue to get better."

Target's website suffered high-profile crashes last September and October. It also had an outage in November. But the retailer says its site was outage-free throughout the holiday season - including Thanksgiving weekend and Cyber Monday.

Other retailers also didn't have a very merry holiday. Sales at Walmart stores open at least year, for instance, rose two percent. But price cuts that juiced up sales contributed to a 15 percent profit decline.

Sales at Kohl's stores open at least a year fell two percent, as shoppers resisted price hikes.

Investors were expecting worse financial results from Target, and the company's share price rose 2.9 percent to $54.50 on Thursday.