(Reuters) - Target Corp (TGT.N) fell short of its own expectations for holiday season sales on Wednesday, reporting a drop off in online growth and demand for toys and electronics that sent a shiver through the wider U.S. retail sector.
The Minneapolis-based chain’s expansion of delivery and in-store pick-ups, along with a broadening of product lines, has made it a success story among U.S. brick-and-mortar retailers striving to deal with the shift to online shopping.
Sales growth in the crucial November-December period, however, came in at just 1.4%, down from 5.7% growth a year ago and compared to the company’s own previous forecasts of around 3-4% for the whole of the fourth quarter.
Shares in Target, which nearly doubled in value last year, fell 5% in response. Walmart (WMT.N) and department stores Macy’s (M.N), Kohl’s (KSS.N), as well as toy makers Hasbro (HAS.O) and Mattel (MAT.O) and electronics seller Best Buy (BBY.N) all headed lower.
“While we knew this season was going to be challenging, it was even more challenging than we expected,” Target’s Chief Executive Officer Brian Cornell said of the numbers.
One standout so far has been membership-only supermarket chain Costco (COST.O), which recorded a 9% rise in comparable store sales for the 18 weeks ended Jan. 5.
“Target missed expectations because web growth didn’t outpace the industry and its online sales in general are lower than the percent that other retailers see from ecommerce,” said Sucharita Kodali, retail analyst at Forrester Research.
Target’s digital sales during the November-December period grew 19%, down from 2018’s 29% rise. Amazon.com Inc (AMZN.O) has said its sales hit a record in the period, although it has not given actual numbers.
“They (Target) need to do better than that if they want to catch up at all with Amazon,” said Jerry Storch, chief executive officer of consultancy Storch Advisors
Target said it now expected its fourth-quarter same-store sales to be in line with the holiday period growth, less than half the 3.8% forecast by sector analysts, according to IBES data from Refinitiv.
The company, which has racked up 10 consecutive quarters of same store sales growth, stuck with its forecast for full-year profit.
Reporting by Nivedita Balu and Praveen Paramasivam in Bengaluru; Editing by Shinjini Ganguli and Patrick Graham