Sales of groceries and home furnishings fell, target department store profits fell short of expectations

Target Stores (TGT-US) reported on Wednesday (22nd) last quarter sales were lower than the previous year and profits fell short of Wall Street expectations as consumers, fatigued by high prices, bought fewer discretionary items and groceries. .

Target Stores (TGT-US) reported on Wednesday (22nd) last quarter sales were down from the previous year and profits fell short of Wall Street expectations as consumers tired of high prices bought fewer discretionary items and groceries.
The Minneapolis-based discount store\’s revenue last quarter was essentially in line with expectations.
Chief Executive Officer Cornell said the company\’s results reflected \”continued weakness in the discretionary category.\”
He said the company hopes to ensure parity for customers and communicate this in a clear way through initiatives such as the relaunch of its membership program.
Target also announced on Monday (20th) that it would reduce prices on thousands of daily items, including milk, bread, paper towels and diapers.
The company maintained its previous full-year guidance, expecting comparable sales to be flat to growing 2% and adjusted earnings per share of $8.60 to $9.60.
According to an LSEG survey of analysts, Target\’s results for the quarter ended May 4 compared with Wall Street expectations as follows: Earnings of $2.03 per share were below expectations of $2.06. Revenue of $24.53 billion was higher than expectations of $24.52 billion. This is the first time Target has missed profit expectations since November 2022.
Target\’s net income for the quarter fell less than 1% to $942 million, or $2.03 a share, from $950 million, or $2.05 a share, a year earlier.
Total revenue fell about 3% from $25.32 billion the year before.
Target, like other retailers, is trying to win over consumers who spend less freely on clothing, home goods or other discretionary items.
The budget fashion retailer is particularly affected by this dynamic because it sells fewer food sales than rival Walmart (WMT-US) , which gets about 60% of its U.S. sales from groceries.
That compares with Target\’s ratio of about 20%.
Inflation cooled slightly in April but the consumer price index was still up 3.4% from a year earlier.
This metric is based on the cost of goods and services at the cash register.
Target acknowledged the challenge with price cuts this week.
The company also competes with other discounters such as Walmart, Aldi and Lidl for shoppers looking for great discounts.
Walmart, which is banking on high-income shoppers, recently launched a premium food brand with most items under $5.
Chief Financial Officer John David Rainey also said last week that customers are turning to grocery stores for cheaper food due to rising prices for fast food.
Target\’s first-quarter traffic, including online and in-store traffic, fell 1.9%; average customer spending also fell 1.9%.
Digital sales rose 1.4%.
This is the first time digital sales have increased in more than a year.
Comparable sales fell 3.7% as shoppers bought beauty products but less in other discretionary categories such as apparel and home.
The drop was in line with StreetAccount analysts\’ expectations.
Discretionary is not the only part of stores facing pressure.
Growth officer Christina Hennington said sales were down in the low single digits in the regular purchase categories, food and drink, and beauty and household essentials.
That said, Hennington said the company is seeing some encouraging trends compared to recent quarters.
Apparel sales increased nearly 4 percentage points from the fiscal fourth quarter as customers purchased spring apparel.
Target\’s stock price closed at $155.78 on Tuesday (21st), with a market value of $72.07 billion.
The company\’s shares were up about 9% this year as of Tuesday\’s close, lagging the S&P 500\’s nearly 12% gain.

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