U.S. retailer Target reported a decline in comparable sales for the fourth consecutive quarter, however with a more moderate decrease than the previous year. This suggests that the company's efforts to return to growth are beginning to bear fruit.
Comparable Sales, Including Revenues from Stores and Digital Channels That Have Been in Operation for at Least One Year, Fell by 3.7% in the Three-Month Period Ending May 4. In particular, Sales of Household Goods, Furniture, Clothing, and Groceries Declined Compared to the Same Period Last Year, According to Management.
Here's the translation:
"Although high prices strain consumers' wallets, they remain overall resilient," explained Target CEO Brian Cornell in a conference call with reporters. Customers continue to spend more on services, which reduces their spending on other purchases, he added. Nevertheless, he emphasized: "We have seen a significant improvement in spending on discretionary goods. That gives us some optimism."
The Minneapolis-based company announced on Wednesday that for the current quarter, it expects comparable sales to remain stable or increase by up to 2%, which would mean the first rise in over a year. Target is struggling to grow as consumers cut back on spending for non-essential items to cope with increased prices for daily necessities.
The growth is expected to be driven by new business initiatives such as the revision of the membership discount program, as well as by a modest return to spending on discretionary items such as clothing, explained management. In addition, it is anticipated that Target will find it easier to increase sales in the current quarter compared to last year, when comparable sales fell by more than 5%.
"We are seeing several positive developments in our business," said Christina Hennington, Chief Growth Officer at Target.
Target is also focusing on lowering prices to stop the decline in sales, particularly for everyday necessities like groceries. Earlier this week, the company announced that it would lower the prices of about 1,500 products, and it plans thousands more price reductions for the summer. These price reductions will include everyday products such as milk, bread, summer party supplies, and school supplies, according to management.
Target is one of several companies cutting prices to boost business. Earlier this month, McDonald’s announced a $5 meal deal to retain price-conscious consumers, while competitors also offer discounts.
Some competitors like Walmart, Amazon.com, and Costco recently reported strong quarterly sales as consumers were drawn to fast shipping or offers on groceries and other essential products. Walmart, the country's largest retailer, reported a 3.8% increase in comparable US sales in the most recent quarter. Retailers that benefited from pandemic-related sales jumps, such as Home Depot and Lowe’s, continued to report declining sales last quarter.
Inflation in the US eased slightly in April, after three months in which consumer prices rose faster than expected. Overall, US retail sales were unchanged last month compared to the previous month.
Target reported a 3.1% decline in quarterly revenue to $24.5 billion. Net income fell by 0.8% to $942 million. The company expects an annual earnings per share between $8.60 and $9.60.
