Retail results a mixed bag before hottest shopping week of year

It’s the most critical time of the year for retail stores but Target isn’t feeling the holiday cheer. The company’s huge miss in earnings in the third quarter sent shares tumbling more than 16% Wednesday morning and forecast more doom for the company’s holiday season.

Target said shoppers were increasingly feeling the impact of inflation as the quarter dragged on and pulled back on spending toward the end of it, taking a sledgehammer to profits. Because of it, the company is planning for a weaker holiday season and is also strategizing to become leaner in the medium term, with a goal of cutting $2 billion to $3 billion in costs over the next three years. The company did not explain how it plans to meet that goal but said it is not planning for layoffs at this time.

In an effort to boost sales, Target has been trying to attract holiday shoppers early by advertising Black Friday discounts more than six weeks ahead of the day. Walmart also pushed early holiday rollback deals, in part to compete with Amazon’s Prime Day event.

Walmart echoed some of Target’s retail concerns in its earnings report this week, noting shoppers are spending more on needs than wants. But because Walmart has a robust grocery department and is attracting more high-income shoppers amid high inflation, the big-box store actually beat expectations.

The holiday picture

Retailers are currently gearing up for the biggest shopping week of the year, Cyber Week, which runs from Thanksgiving through Cyber Monday. Experts predict sales will still grow during this time but not by as much as some previous years.

Adobe forecasts Black Friday online sales will grow by just 1% on the year, while Cyber Monday will be up 5.1%, setting a record $11.2 billion in spending for the day. Adobe said early holiday deals are drawing away from typical Cyber Week spending.

Meanwhile, the National Retail Federation forecasts overall holiday sales will still grow between 6% and 8% for the 2022 season, but that’s a big dip from the 13.5% growth seen in 2021.

Retail sales strengthen

In October, retail sales grew more than expected at 1.3%, boosted by vehicle purchases and gasoline. The figure is adjusted for seasonal variation but not inflation. Gas stations saw a 4.1% increase on the month while auto dealerships saw a 1.3% increase, according to the Commerce Department. Grocery stores also saw a 1.4% increase in sales on the month.

Meanwhile, sales of electronics and appliances went down 0.3% on the month and 12.1% compared with a year ago. Department stores saw a 2.1% decline on the month for October.

“October retail sales data confirms that consumers continue to stretch their dollars on household priorities,” NRF President Matthew Shay said. “With a strong labor market and excess savings, we are expecting a solid 5-day holiday shopping weekend.”