Despite January expectations that were gradually ratcheted down, Target’s results were once again disappointing. This marks the second month in a row where internal projections called for a low to mid single digit increase and results failed to materialize.
Interestingly, there remains a major divergence between the growing, P-Fresh driven performance in the food and consumables category and the rest of the store. Unfortunately, grocery induced traffic does not appear to be leading to an acceleration in discretionary spending at this point. While two months doesn’t make a trend, scrutiny surrounding the company’s topline initiatives centered on 5% rewards and P-Fresh is on the rise. Over time, these strategies should work. However, sales expectations need to be taken down in the near term. Management’s guidance for low single digit increases in February is a start, but this is clearly not the 4+% comp trend we were originally expecting to see for most of 2011.