Target CEO issues rare statement on holiday sales

Amid tepid expectations for holiday sales, Target Corp. issued an update Wednesday saying that it is satisfied with how it has fared so far this season.

"We are pleased with Target's holiday performance — from guest experience and engagement to overall results both in-store and online," CEO Gregg Steinhafel said in a statement.

It's rare for major retailers to provide sales guidance in the midst of an ongoing quarter. Target has historically kept its cards close to the vest, which makes Steinhafel's statement even more unusual, analysts say.

"I've never seen them do this," said Brian Yarbrough, a retail analyst with Edward Jones Investments in St. Louis.

Target declined to comment beyond the statement. The company previously issued a modest forecast for the holiday shopping season, predicting that comparable sales will be flat to slightly positive.

Yarbrough suspects that Target's defensive posture comes from its need to reassure Wall Street. The company alarmed investors last quarter when it continued to report disappointing sales in key categories and reported falling gross profit margins. Some analysts have also criticized the company for reducing its inventory at a time when Target really needs top-line sales, especially during the holiday shopping season, when Target has underperformed for the last couple of years.

"It appears that as [sales growth] has become more difficult to generate, Target has cut back inventory levels," Christopher Horvers, a retail analyst with JPMorgan. "This could have long-term implications as basics and fashion go out of stock."

For the first nine months this year, sales at stores open for at least a year barely rose 0.5 percent. The company told investors at the end of October that it no longer expects to hit its goal of $100 million in annual sales by 2017, mostly because of weakness in the core U.S. market.

Target also touted Wednesday the growth of its digital businesses, saying results have exceeded its own projections and industry growth rates. The company said online traffic is growing at double-digit rates and mobile sales have more than doubled since the holiday period last year. In addition, Target ranked as the most-browsed retailer on mobile over the past six months, according to a report from Mobiquity.

But Amy Koo, an analyst with Kantar Retail consulting firm in Boston, was cautious about those numbers. For example, Target's digital growth is not surprising since the company is comparing its performance to an already low baseline from last year. Plus the Mobiquity figure referred to just traffic, not actual sales, she said.

"It looks like they are doing well," Koo said. "But the numbers are not really informative. Target is leaving a lot of room for how well they will actually do. We'll see once the numbers come out" in January.

Yarbrough believes that Target's holiday sales may be better than it predicted.

"I've got to believe that Steinhafel's statement means that Target will either meet or exceed its expectations. If not, that would be a real disaster," he said.

Target stock rose $1.90, or 3 percent, to close Wednesday at $63.55.

Thomas Lee • 612-673-4113