Health care helps Target's January comps, but not enough

2/5/2009

MINNEAPOLIS The health care and electronics categories at Target produced high single-digit January same-store sales gains, but those increases weren’t enough to offset weakness in other areas of the retailer’s business.

In total, Target had a same-store sales decline of 3.3%, due largely to a decline in customer traffic and weak sales in discretionary such categories as apparel and home. Target disclosed that the women’s apparel category had a decline in the low-20% range, while the home category had a high single-digit decline. Total sales for the four week period ended January 31, increased slightly less than 1% to $4.1 billion.

“January sales were in line with our planned range for the month,” said Target chairman, president and CEO Gregg Steinhafel.

Even so, because Target is selling more low-margin food and consumable products, has increased bad debt reserves, experienced holiday season markdown pressure and last week incurred more expenses associated with a major workforce reduction, the company said its fourth-quarter earnings would be less than consensus analysts’ estimate of 86 cents.

For the month of February, Target said it expects same-store sales to decline in the mid-single digits, but, given the uncertainty in the market, a wide range of outcomes around that figure are possible.

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