Target cut its outlook for October sales at stores open at least a year on Monday, the second month in a row the discount retailer has lowered its same-store sales forecast, as investors begin to focus on how the holiday sales season will measure up.
Target now expects same-store sales to rise between 2 percent to 4 percent, down from a forecast earlier this month of an increase of between 3 percent and 5 percent.
In a recorded message, the retailer said its reduced forecast was partly based on "greater-than-normal daily volatility and continued disappointing sales results for the first two weeks of October."
It's important to remember that retail companies work very hard to manage Christmas expectations. Typically, they issue cautionary/concerned outlook early in the season in order to lower expectations. Then an earnings beat looks more impressive giving traders reason to bid up retail shares. In addition, counting out the US consumer is never a good idea. In other words, the death of the consumer has been greatly exaggerated.
That being said, there are important economic headwinds to consumer spending this year. Housing has been in a slump for a little over a year Gas prices are still high and oil is spiking. Polls indicate the consumer is concerned about the future and consumer confidence is lowering. Add these factors together and you get a consumer under pressure who may just cut back on holiday shopping this year.
