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Target Misses Bullseye on Holiday Sales on Weak Demand for Toys, Electronics

Target warns that growth in its fiscal fourth quarter likely will be lower amid weaker sales of toys, electronics and home furnishings over the critical holiday shopping season.

Shares of discount retail giant Target  (TGT) - Get Target Corporation Report fell on Wednesday after the company said sales of toys, electronics and home furnishings over the critical holiday shopping season weren’t as strong as expected, and warned that overall growth for its fiscal fourth quarter  will likely be lower than predicted.

Target reported that sales rose 1.4% between Nov. 1 and Dec. 31 in stores and through its digital channels, below its own forecasts, and warned that growth for the full quarter, which includes January, will likely come in less than half the 3% to 4% growth it had been expecting.

The Minneapolis-based company pointed to weak sales of toys and electronics – two key holiday-season categories that all retailers count on to boost sales. Still, it said it was maintaining its profit targets, in part because other categories that did have robust sales earn higher margins.

For the fourth quarter, Target is still expecting adjusted per-share earnings of $1.54 to $1.74 and full-year adjusted per-share earnings of $6.25 to $6.45.

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Investors and analysts took Target’s miss on its own numbers as a sign that it may not have been the blockbuster holiday shopping season retailers were expecting.

Indeed, despite a condensed calendar shopping period and initial expectations of a strong post-Thanksgiving shopping season kick-off, Target and other retailers including Kohl’s  (KSS) - Get Kohl's Corporation Report also have reported sluggish holiday sales.

Macy's  (M) - Get Macy's, Inc. Report, J.C. Penney  (JCP) - Get J. C. Penney Company, Inc. Report and Victoria's Secret parent L Brands  (LB) - Get L Brands, Inc. Report so far have all reported lower sales in the critical November and December months.

To date, Costco  (COST) - Get Costco Wholesale Corporation Report stands as the outlier, reporting comparable sales up 9% in the five weeks ended Jan. 5, including e-commerce and international sales.

The two biggest U.S. retailers, Walmart  (WMT) - Get Walmart Inc. Report and  (AMZN) - Get Inc. Report, haven't yet announced their holiday results. Walmart will release its fourth-quarter results on Feb. 18.

Shares of Target were down 6.22% at $117.43 in morning trading on Wednesday. Shares of Walmart were down in sympathy, dropping 0.98% to $115.03.