Sentiments remained low for Target due to weak comparable sales growth in Q4 2019, says GlobalData

The US tourism & leisure industry saw a drop of 18.9% in overall deal activity during February 2020, when compared with the last 12-month average, according to GlobalData’s deals database.

A slow holiday comparable (comp) sales growth coupled with mismanagement of inventories during the fourth quarter (Q4) of 2019 affected sentiments for the US-based retailer, Target, says GlobalData, a leading data and analytics company.

GlobalData’s Company Filing Analytics platform, found that Target’s overall sentiment score declined by 13.5% in Q4 2019 (ending February 1, 2020) compared to Q3 2019 (ending November 2, 2019).

Aurojyoti Bose, Lead Analyst at GlobalData, comments: “Target under-performed during the holiday season with its total comp sales growing by only 1.4% (year-on-year) for the November and December 2019 period compared to 5.7% growth during the same period in previous year.

“Strong gains in the apparel and beauty segment were also offset by substandard performance of electronics, toys and home utilities.”

According to Target, in November and December 2019, electronics sales were down by more than 6% (year-on-year), while home business sales were down 1% during that period.

Bose adds: “Target’s low inventory levels resulted in poor sales during the holidays and consequently in January 2020.

“Despite comments on improving and modernizing the supply chain in the Q3 2019 transcript, Target was unable to maintain inventories in December 2019 and January 2020.”

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Furthermore, according to the Q4 2019 earnings call, the company expects comp sales growth in upcoming quarters also to be in the low-single digits.

In a statement, Target withdrew its previous expectations due to the dynamic situation surrounding the coronavirus (COVID-19) outbreak. The retail chain also announced a scale back on its 2020 remodeling plan, by bringing down the number of projects to 130 from 300.

However, the COVID-19 outbreak has caused a rise in comp sales due to increased panic buying. In mid-February and March 2020, the company stocked up on essential goods, during which comp sales surged (year-on-year comparison until March 25, 2020).

Bose concludes: “Though Target’s sentiments affected in Q4 2019, during the COVID-19 outbreak, the company has responded strongly by cutting short its 2020 remodeling plan to focus on bulking up the supply of essential goods. Keeping up inventories is likely to positively influence comp sales growth and drive future sentiments.”

ENDS

The US tourism & leisure industry saw a drop of 18.9% in overall deal activity during February 2020, when compared with the last 12-month average, according to GlobalData’s deals database.

A total of 30 deals worth $458.86m were announced in February 2020, compared to the 12-month average of 37 deals.

M&A was the leading category in the month in terms of volume with 19 deals which accounted for 63.3% of all deals.

In second place was venture financing with seven deals, followed by private equity with four transactions, respectively accounting for 23.3% and 13.3% of overall deal activity in the country’s tourism & leisure industry during the month.

In terms of value of deals, private equity was the leading deal category in the US tourism & leisure industry with total deals worth $238m, while M&A and venture financing deals totalled $181.7m and $39.16m, respectively.

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