Goal on Wednesday posted a year-over-year sales decline and missed Wall Street's profit estimates as consumers fatigued by high prices bought fewer consumer goods in addition to groceries.
Sales on the Minneapolis discounter roughly met expectations. In a call with reporters, CEO Brian Cornell said the corporate's results reflected “continued weak trends in consumer product categories.”
He said the corporate wanted to make sure it was providing value to customers and communicate that in clear ways, resembling by relaunching its loyalty program. Target also announced Monday that it might cut prices on hundreds of on a regular basis items, including milk, bread, paper towels and diapers.
Target stuck to its previous full-year guidance, expecting comparable sales to extend between flat and a pair of%, in addition to adjusted earnings per share $8.60 to $9.60.
Here's what Target reported for the three-month period ended May 4 in comparison with Wall Street's expectations, based on an analyst survey by LSEG:
- Earnings per share: $2.03 vs. expected $2.06
- Revenue: $24.53 billion versus expected $24.52 billion
It was the primary time since November 2022 that Target missed earnings expectations.
Target’s net profit fell by lower than 1% from $950 million, or $2.05 per share, within the year-ago quarter to $942 million, or $2.03 per share.
Total revenue fell about 3% from $25.32 billion a yr earlier.
Like other retailers, Target has tried to win over consumers who don’t spend as generously on clothing, household goods or other necessities. The cheap-chic retailer is especially affected by the dynamic since it generates less grocery sales than its rival Walmart, which gets about 60% of its U.S. sales from groceries. That compares to about 20% at Target.
Inflation cooled barely in April, but the patron price index still rose 3.4% year-on-year. The central metric measures how much goods and services cost on the checkout.
Target recognized this challenge with this week's price cuts.
The company also competes with other discount retailers, including Walmart, Aldi and Lidl Hunt for bargain hunters.
Walmart, for instance, has been gaining market share from higher-income shoppers and recently launched a premium grocery brand, most of whose items are under $5. The company's CFO, John David Rainey, also said last week that customers are turning to the corporate Grocery shelves for cheaper meals due to the rising prices of fast food.
Target's sales challenges
In Target's first quarter, customer traffic, which incorporates online and physical stores, fell 1.9%. The average amount customers spent on these visits also fell by 1.9%.
Digital sales increased by 1.4%. It was the primary increase in digital sales in greater than a yr.
Comparable sales, also generally known as “same-store sales,” fell 3.7% as shoppers purchased beauty items but fewer items from other consumer product categories resembling apparel and residential. According to StreetAccount, this decline was consistent with analyst expectations.
It wasn't just the patron goods sector that was under pressure. Sales within the food and beverage and wonder and residential goods frequency categories fell within the low single digits, Chief Growth Officer Christina Hennington said in a call with reporters.
Still, Hennington said Target is seeing some encouraging trends in comparison with recent quarters. Apparel sales rose nearly 4 percentage points from the fourth fiscal quarter as customers purchased outfits for spring.
She said Target's limited-time collection with Diane Von Furstenberg drove thousands and thousands of unique visits to the retailer's website every day of launch week and increased customer basket sizes by about 15% on average.
Other unique items also drove up spending, she said. These included partnering with tennis and lifestyle brand Prince to sell pickleball equipment and Taylor Swift's latest album, which Target leveraged with in-store events and photo ops.
Target shares closed Tuesday at $155.78, giving it a market value of $72.07 billion. As of Tuesday's close, shares of Target are up about 9% thus far this yr, lagging the S&P 500's nearly 12% gains.
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