Target’s Earnings Miss Hints that December Retail Sales May Be a Lump of Coal
Matt Weller, CFA, CMT January 16, 2020 6:46 AM
Investors fear that Target’s disappointing quarter is just the “canary in the coal mine” for holiday retail sales...
With the US economy in the tenth year of a record long expansion and unemployment at half-century low, most traders assumed 2019’s critical holiday shopping season would mark another record…and based on the initial estimates and survey-based measures of spending, it may well have done so.
That said, there are still some reasons for caution ahead of the release of tomorrow’s December retail sales report. For one, the Thanksgiving holiday fell far later in the year than usual, condensing the typical holiday shopping season from five weeks to just four.
Then, there was this morning’s earnings report from big box retailer Target (TGT). The company reported that same store sales rose just 1.4% y/y in the key November-December period, well below analyst estimates of a 3.8% rise. Sales of generally popular electronics (-6% y/y) and toys (+0%) were cited as specific areas of weakness, driving the stock down -7% as of writing:
Source: TradingView, GAIN Capital. Please note this product may not be available to trade in all regions.
Of course, investors fear that Target’s disappointing quarter is just the proverbial “canary in the coal mine” for broader holiday retail sales, so it’s no surprise that rival Wal-Mart (WMT) is trading off by -1% and the overall retail sector (XRT) is also ticking lower, despite a general rise in the broader indices today.
Regardless of which market you trade, tomorrow’s US retail sales report will be critical. Economists are looking for a 0.3% m/m increase, with ex-auto retail sales expected to rise at a more robust 0.5% m/m. That said, if Target’s miss this morning is any indication, there could be potential for a below-expectation reading, which could drive the retail sector, the broader stock market, and even the US dollar lower in tomorrow’s US session.
From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.
As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.