• by Sarah Mahoney  @mahoney_sarah, November 21, 2018

Just days away from that big Black Friday weekend, Target, Kohl’s and Best Buy are issuing quarterly earnings reports that have observers chewing their fingernails. Amid steep drops in the broader stock market, retail stocks took a particular pounding, with investors doubting just how heavy Santa’s sleigh might be this year.

While Target’s sales are strong, digital revenues are sizzling and its CEO is bullish on expectations for holiday spending, earnings came in below expectation, with the company citing higher expenses.

The Minneapolis-based retailer says same-store sales rose 5.1%, traffic gained 5.3% and digital soared 49%.
Total revenue grew 5.6% to $17.8 billion, up from $16.9 billion in the year-ago period.

But profits fell slightly below expectations, with operating income slipping 3.3% to $819 million from $847 million in the previous quarter. That was enough to scare off Wall Street, and the stock fell as much as 12% on the news.

But S&P Global Ratings says it still expects a solid holiday season for Target, projecting sales gains results for the next quarter. “Toys, baby, and beauty remain strong categories, and we will be watching closely in the coming year to see if Target can sustain the growth of its private-label brands,” it writes in its report.

Best Buy’s results beat forecasts, with total sales rising to $9.59 billion, up from $9.32 billion last year, and comparable store results advancing 4.3%.

But investors got spooked by its forecast for the fourth quarter, with comparable sales growth expected to be more mediocre than merry, coming in flat to up 3%. For the full fiscal 2019, it anticipates comparable-store gains of between 4% and 5%.

Neil Saunders, managing director of GlobalData Retail, chalks its strong results up to “the steps it has taken to make itself relevant to consumers,” he writes in his reaction to Best Buy’s earnings. Saunders says its stores “are a place of experience that effectively showcases technology and allows customers to come and discover. And they are a space in which shoppers can get detailed advice and recommendations in a way that they can't online.”

At Kohl’s, comparable store sales rose 2.5%, its fifth quarter in a row of positive gains. Total revenues climbed 1.3%, to $4.62 billion. Net income zoomed to $161 million from $117 million.

But while all that beat expectations, Kohl’s new earnings outlook for the full fiscal year was softer than many expected, which was enough for it to get swept up in the market’s retail rout, with shares down as much as 10%.