Target's holiday sales exceeded expectations, but profits did not meet expectations. Fer House
This article mainly focuses on the performance of Target, a US-based supermarket chain, during the holiday sales season, the overall situation of the US retail industry, and the executive changes at Target.
1. **Target's Holiday Sales Performance**: During the holidays, Target's sales exceeded expectations. Comparable sales in the fourth fiscal quarter are expected to increase by approximately 1.5%, higher than the previous expectation of "basically flat". Total sales in November - December increased by 2.8%, comparable sales increased by 2% year - over - year, digital sales increased by nearly 9%, and the overall visitor traffic to stores and online increased by nearly 3% year - over - year. Sales on Black Friday and Cyber Monday reached record highs. Its subscription services and third - party marketplace platforms contributed to the growth. For example, Target Circle 360 led to more than a 30% year - over - year increase in same - day delivery services in November - December, and Target Plus sales increased by nearly 50%.
2. **Profit Situation**: Despite the better - than - expected sales, Target did not raise its profit expectations. Earnings per share for the fourth quarter are expected to be between $1.85 and $2.45, and for the full year, between $8.30 and $8.90. This indicates that consumers' purchases were driven by discounts, affecting profits. The company had lowered its profit guidance in early November last year due to weak sales of discretionary goods and the costs of port strikes.
3. **Industry Background**: US holiday retail sales from November 1 to December 31, 2024, increased by 4% year - over - year, reaching a total of $994.1 billion. The growth rate of consumer spending is similar to that before the pandemic, partly due to the decline in inflation. However, consumers still pursue discounts and maintain budget - consciousness. Although some brands like Lululemon raised their performance expectations, their share prices fell in part. Nordstrom raised its full - year sales forecast but had a conservative prediction before, and Macy’s sales are expected to be at or slightly below the lower end of expectations.
4. **Target's Strategies and Consumer Behavior**: Target adopted a price - reduction strategy to attract consumers. In May 2024, it announced price cuts for about 5,000 frequently - purchased items, and in October, it announced price cuts for more than 2,000 items during the holiday season. By the end of the holiday season, more than 10,000 items had their prices reduced. Chief Operating Officer Rick Gomez said that sales surged during promotional activities, but sales declined before and after promotions. Consumers are more planned in their shopping. However, during the holidays, they are still willing to spend on "must - buy items", such as Taylor Swift's hardcover books.
5. **Executive Changes and Leadership Transition**: Target announced several executive changes, which will take effect in early February. Mark Schindele, the chief store officer, retired, and Adrienne Costanzo took over. Brett Craig, the chief information officer, retired, and Prateek Wadhwa took over. Sarah Travis was appointed as the newly - created chief digital and revenue officer. In addition, Jim Ley, the new chief financial officer, took office at the end of September last year. The company is undergoing a leadership transition, and the expiration date of CEO Brian Cornell's contract and his successor have not been announced.
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