Target hopes momentum from holiday season jump-starts sales this year

Target leaned in heavily toward promotions and sales during the holidays, a strategy that seems to have left it in the middle of the pack of retailers for the season.

The Minneapolis-based retailer said Thursday its comparable sales rose about 2%, digital sales nearly 9% and overall customer traffic about 3%.

The report syncs with the national retail sales report that came out Thursday, which showed consumers in December definitely leaned into discretionary items like apparel and electronics that ended up under the Christmas tree.

For Target, average is still an improvement from the August-to-October period, when sales were stagnant and inventory misses dinged profits.

“Target is not a winner but nor is it a loser,” said Neil Saunders, managing director of GlobalData Retail. “It will be very satisfied with its performance as sales have come in above forecasts, but there is a lot of work to do to get back to being one of the leaders in the sector — a position Target used to occupy.”

Target on Thursday increased its revenue guidance for the November-through-January period by 1.5% but kept its profit estimate the same.

That had investors dumping stock early, although by noon the early 5% decline had improved to about a 2% loss in value.

Target had cut its profit guidance in early November after missing the mark with third-quarter earnings, blaming part of the issue on an inventory misstep as the company prepared for a port strike that turned out to be short-lived.

Scot Ciccarelli, an analyst with Truist, told Bloomberg News it’s likely the big sales — which tough price competition from Amazon and Walmart spurred — might still make it tough for Target to meet the more conservative profit goals.

Still, Joseph Feldman, analyst with Telsey Advisory Group, said the report “gives ... some optimism as you head into the year.”

Saunders said he thinks it was the right strategy for Target to go after higher sales, even if it had to discount more merchandise.

The momentum is important as consumers remain stressed from higher grocery prices, interest rates and a job market that is still good but not as robust as it once was.

“For the start of 2025, the consumer mood will likely remain the same as it was across 2024,” Saunders said. “Consumers are still looking for deals and low prices to help them balance their household finances better. We may see a step change by the end of the year, depending on what happens to things like taxes and inflation.”

Target last year lost ground to Walmart with upper middle-class consumers that are its bread and butter. It responded by cutting prices on thousands of items and held holiday sales earlier.

Now on the other end, there’s push from midpriced sector players like Lululemon and American Eagle, which reported strong preliminary holiday sales, said Carol Spieckerman of Spieckerman Retail.

Walmart has grown and changed so much now, it really is in a different league along with Amazon, she said.

“That’s not to say that Target isn’t competing against Walmart — it is,“ she said. ”In short, Target is getting hit from all sides on the profit-making categories that used to define it. It must respond to Walmart’s value proposition while hoping that it still has enough brand cachet to compete against retailers that enjoy affinity with new generations of shoppers."

Rick Gomez, Target’s chief commercial officer, said Monday at the National Retail Federation’s Big Show that consumers have been finicky all year, CNBC reported. For example, the retailer saw a sales surge during Circle Week in October but lower sales the week before and after it.

Gomez also said at the Big Show that Target has made progress at quickening its supply chain to respond to trends.

Heavy promotion and sales — plus a record Black Friday and Cyber Monday — boosted comparable sales by 2%. As a result, Target raised its revenue guidance for the full fourth quarter from flat to an increase of 1.5%.

While not giving specifics, Target said it saw “a meaningful acceleration in discretionary categories” compared with the third quarter, especially apparel, toys and beauty products.

“Our team delivered continued traffic growth and better-than-expected holiday-season performance, thanks to their focus on serving guests with an inspiring, easy and joyous shopping experience,” Target CEO Brian Cornell said.

The National Retail Federation had predicted holiday sales would increase between 2.5% and 3.5%. The Commerce Department’s December sales report released Thursday had electronics sales up 5%, apparel and accessories up 2% and sporting goods up 1%.

The figures are preliminary, and the retailer did not change its projected profit. The complete report comes in March.

Target also announced some executive changes Thursday, including the retirement of Mark Schindele, executive vice president and chief stores officer. His successor will be Adrienne Costanzo, currently senior vice president of store operations.

Also effective Feb. 2, Brett Craig, executive chief information officer, will retire. Prat Vemana, currently chief digital and product officer, will take on the role of chief information and product officer as well.

Target also said Sarah Travis, currently senior vice president, Roundel and social commerce, will become the chief digital and revenue officer.