Target withstands Walmart's aggressive pricing, assortment message

MINNEAPOLIS — The 13.1% increase in same-store sales Target reported for April was toward the low end of the company’s projection of an increase in the mid-teens, and begs the question whether Walmart’s mid-month launch of a new marketing campaign contributed to the weakness.

Target’s total sales for the period increased 13.7% to nearly $4.9 billion, compared with roughly $4.3 billion during the same month last year. Easter had a huge impact on the company’s results, as it did for many other retailers, since the holiday fell three weeks later this year, which caused seasonal sales to shift into the April reporting period and, in Target’s case, made for an easy comparison to a prior-year comps decline of 5.9%.

As for any potential impact related to Walmart’s renewed emphasis around everyday low prices and a major advertising campaign that debuted the week prior to Easter, Target didn’t address the issue specifically but did make it clear that as has been the case in prior months, more people are shopping its stores and comps growth is coming from food and consumables.

More specifically, the company said more than half of its increase in same-store sales was due to growth in same-store transactions, with the remainder of the increase resulting from an increase in average transaction size. In addition, the company said its April same-store sales performance was strongest in the grocery category, which experienced a 30% gain, while boys' and girls' apparel comps advanced about 20% as did hardlines. However, the health care and beauty category was up in the mid- to high-single digits, while the home category advanced in the low- to mid-single digits.

“April comparable-store sales were somewhat below our expectations, as guests continued to be very cautious in their spending leading up to Easter,” said Target chairman, president and CEO Gregg Steinhafel. “Target remains focused on delivering an outstanding shopping experience, providing unbeatable value on high-quality, well-designed items throughout our assortment. This is more important than ever for our guests as they face increasing pressure on their household budgets due to higher energy costs and increasing prices of food, apparel and home merchandise.”

Going forward, Target has forecast its same-store sales for May will increase in the low- to mid-single digit range, which suggests the company isn’t anticipating the loss of shopper traffic to Walmart, even though its larger rival has grown more aggressive with messaging around price and breadth of assortment.