MINNEAPOLIS — Target on Wednesday posted a decline in quarterly revenue as higher prices cut into shopper spending.
The Minneapolis retailer also delivered profit results that were below analyst expectations and issued a muted profit outlook, but it said it expects that it will get back to quarterly sales growth this quarter.
Shares slumped 8% in premarket trading on Wednesday following the release of sales numbers.
Target is looking for ways to reverse softening sales. On Monday, the company said it would cut prices on thousands of consumer basics over the next several months - from diapers to milk - in a bid to entice cost-conscious customers who are looking for deals.
In a bid to compete with Walmart and Amazon, it's also trying to make shopping at Target more convenient and enjoyable.
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.
Additional steps include updating existing locations, building more than 300 new stores over the next decade, and also broadening store-owned brand offerings for more customer choices.
CEO Brian Cornell told reporters Tuesday that shopping patterns are normalizing, with customers gravitating toward services and out-of-home entertainment. But he said one of the biggest challenges Target faces 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 analyst 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 - those from stores or digital channels operating at least 12 months - slipped 3.7%. That was 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. The retailer 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.
WATCH MORE ON KARE 11+
Download the free KARE 11+ app for Roku, Fire TV, Apple TV and other smart TV platforms to watch more from KARE 11 anytime! The KARE 11+ app includes live streams of all of KARE 11's newscasts. You'll also find on-demand replays of newscasts; the latest from KARE 11 Investigates, Breaking the News and the Land of 10,000 Stories; exclusive programs like Verify and HeartThreads; and Minnesota sports talk from our partners at Locked On Minnesota.
- Add KARE 11+ on Roku here or by searching for KARE 11 in the Roku Channel Store.
- Add KARE 11+ on Fire TV here or by searching for KARE 11 in the Amazon App Store.
- Learn more about the KARE 11+ app for Apple TV in the Apple App Store.
- Learn more about KARE 11+ here.
Watch more local news:
Watch the latest local news from the Twin Cities and across Minnesota in our YouTube playlist: