Taylor Swift saved Christmas — or at least Target Corp.’s holiday season.
The Minneapolis-based retailer on Thursday upgraded its sales guidance for the three months ended Jan.31 after November and December revenue was stronger than expected.
Target
The results were a surprise. Target had lagged competitors much of last year, and it’s unusual for a company to turn things around during the crucial “golden quarter,” so called because it accounts for such a large share of retailers’ annual sales and profits. (Another straggler who defied the odds: Lululemon Athletica Inc., which has been grappling with changing fashion trends and upstart rivals also upgraded its fourth-quarter sales guidance on Monday.)
It helps that shoppers were out in force during the holiday season: US retail sales in December rose 3.8% from 2023, defying some expectations of a dramatic slowdown.
Target, which gets about 60% of sales from nice-to-have items, said it had seen a “meaningful acceleration in discretionary categories.” Falling temperatures helped improve apparel sales, which account for about 15% of Targets total and had softened during the unusually warm fall. Demand for toys, a holiday staple, was also strong.
But the decision to become the exclusive seller of Taylor Swift’s The Eras Tour Book, which hit shelves on Black Friday and sold nearly 1 million copies in its first week, also shows that Target has got its product mojo back.
The book, initially sold only in stores, helped Target achieve record sales over the Black Friday and Cyber Monday shopping period. Its likely that those coming into stores to buy it put some clothes or cosmetics in their carts, too.
The company has been trying to improve its performance in other ways, for example by lowering prices to tempt cash-strapped shoppers and introducing an Amazon Prime-like loyalty program, which contributed to a 9% increase in digital sales in November and December.
Target must now build on the fourth-quarter momentum. For the past year or so, it has oscillated between beating expectations and coming up short, frustrating investors. That task won’t be easy given that competitor Walmart Inc. is wooing Target’s more affluent customers with stylish fashion and fancy food.
The market isn’t yet convinced. After Target upgraded its sales outlook, the shares fell as much as 5% in early trading as it left earnings expectations unchanged.
To truly turn their heads, Target must show that the self-inflicted wounds that have dogged the company for the past three years are behind it. It looked like it was making progress on this front until a misstep in the third quarter, when it increased costs by stocking up ahead a port strike that ultimately ended quickly.
Retailers typically start planning for the next winter holiday as soon as the last one has ended. That means Target has plenty of time to find another product that can replicate the Taylor Swift effect.
