Merchandise is displayed at a Target store Nov. 15, 2023, in Orlando, Fla. Target reports earnings on Wednesday, May 22, 2024. (AP Photo/John Raoux, File)
NEW YORK — Target on Wednesday posted a decline in quarterly revenue as still higher prices on essentials cut into shopper spending.
The Minneapolis retailer also delivered profit results that were below analyst expectations and issued a muted profit outlook. It posted its fourth straight quarter of declines in comparable sales — those from stores or digital channels operating at least 12 months. But Target said it expects that it will get back to quarterly sales growth this quarter.
Shares slumped nearly 10% in premarket trading on Wednesday.
Target is looking for ways to reverse softening sales. On Monday, said it would cut prices on thousands of consumer basics over the next several months, from diapers to milk, in a bid to entice customers who are looking for deals.
And it’s also trying to make shopping at Target more convenient and enjoyable to better compete with Walmart and Amazon.com.
Target announced a new paid membership program in April called Target Circle 360 which comes with unlimited free same-day delivery for orders over $35 and free two-day shipping for all orders. The annual $99 per year membership is getting a strong reception, the company says.
It’s updating existing locations, building more than 300 new stores over the next decade, and also broadening store-owned brand offerings for more cost-conscious customer choices.
Target is among a batch of retailers that have reported quarterly results so far, but it did not fare as well as Amazon and Walmart. Amazon, the nation’s biggest online retailer, announced better-than-expected results for the holiday shopping period last month. Walmart posted strong sales results, as its low prices have attracted shoppers scouring for deals.
Walmart is also drawing households with income exceeding $100,000 a year as it focuses on convenient and faster ways to shop. Two-thirds of Walmart’s market share gains come from that group, Walmart said.
The nation’s top home improvement retailers — Home Depot and Lowe’s —which had reaped the benefits of pandemic splurges on home projects, posted another quarter of sales declines with so many homeowners and prospective home buyers constrained by high mortgage rates and inflation.
Target CEO Brian Cornell told reporters Tuesday that shopping patterns are normalizing, with customers gravitating toward services and out of home entertainment, which cuts into spending on discretionary items. He said one of the biggest challenges they face is inflation on groceries and household essentials, which he said in many cases is still up 20% to 30% compared with prices before the pandemic. That, he said, is putting a “strain on consumer wallets.”
But Cornell also noted a healthy job market and the confidence that consumers can find another job has helped to boost spending.
“We haven’t seen a significant change (in consumer behavior) for the last few quarters, and we still see a very resilient consumer and expect that to continue over the balance of the year,” Cornell said.
Target reported net income of $942 million, or $2.03 per share, which is 3 cents short of analysts projections, according to a survey by FactSet. Profit for the period ended May 4 was also below last year’s $950 million, or $2.05 per share.
Its revenue slipped 3.1% to $24.53 billion, slightly better than the $24.52 billion Wall Street expected.
Comparable sales slipped 3.7% in the latest quarter, a smaller decline from the 4.4% drop during the fourth quarter.
Sales declines were primarily in discretionary categories, and were partially offset by continued growth in beauty, the company said. But Target said clothing sales, while still down, improved.
For its second quarter, Target said it expects comparable sales to be anywhere from unchanged to a 2% gain. It expects to earn between $1.95 to $2.35 per share. Analysts expect $2.20 per share.
For the full year, Target continues to expect comparable sales to be no more than a 2% increase. Earnings per share should be in the range of $8.60 to $9.60. Analysts expect $9.49, according to FactSet.