Target cuts profit after a bumpy holiday season

Associated Press

NEW YORK

Target cut its fourth-quarter profit and sales outlook after sluggish holiday traffic in its stores and weak sales in key areas such as electronics and food offset a surging online business.

The holiday season was disappointing for Target and several other retailers trying to be more nimble in a changing landscape where online leader Amazon.com sets the rules. Macy’s, Sears and others have announced store closings and layoffs.

Target said revenue in its signature categories – clothes, home, wellness and toys – increased in November and December. But electronics and entertainment were a weak spot, as well as food and essentials. Target has been struggling to find the right assortment of groceries to bring shoppers back in more often.

The Minneapolis-based discounter said the costs associated with bolstering its online services and price competition for shoppers conditioned to look for deals hurt fourth-quarter margins.

“While we were pleased with Black Friday sales, December digital-sales growth of more than 40 percent and continued strength in our signature categories, these results were offset by early season sales softness and disappointing traffic and sales trends in our stores,” CEO Brian Cornell said in a statement.

Target had stepped up its emphasis on value, increased its holiday marketing and showcased more exclusive merchandise such as the children’s clothing brand Cat & Jack. It also added 1,800 new or exclusive toys. That didn’t lure enough shoppers to the stores, and that underscores the challenges for the industry.

Moody’s lead retail analyst Charlie O’Shea said Target and other stores are moving to merge their online businesses with their physical stores, but it will be years before they can do it efficiently.