Inflation has been eating into Target’s profits, sending the company’s shares falling as much as 10 percent, as the “cheap chic” discount retailer revealed that customers are buying less groceries and discretionary items.
The Minneapolis-based retailer reported a fourth quarter that fell short of Wall Street expectations on Wednesday. This was a further blow to the company, whose stock price has fallen more than 40% since hitting an all-time high in November 2021.
Target announced plans earlier this week to gradually cut prices on 5,000 of its most frequently purchased items in hopes of luring inflation-weary customers back to its stores.
This follows a move in January that introduced “dealworthy,” a new line of 400 products starting at less than $1, with most items priced under $10.
Inflation is eroding consumer confidence, and more adults are feeling worse about their household finances due to rising prices for everyday household goods, according to a survey by the Federal Reserve. became.
Target on Wednesday said it expects second-quarter comparable sales to be flat to up 2 percent, bouncing back from four consecutive quarters of declines.
The company expects adjusted earnings to be between $1.95 and $2.35 per share. Analysts on average were expecting comparable sales growth of 1.4% and earnings of $2.19 per share.
Target’s quarterly results lagged those of larger rival Walmart Inc., which reported better-than-expected earnings and raised its full-year outlook as wealthier customers seek bargains.
“This performance is significantly worse than the broader market, highlighting that Target is losing market share,” said Neil Saunders, managing director at GlobalData. “Overall, today’s numbers paint a picture of a business that has run out of steam.”
Target’s comparable sales for the first quarter, which ended May 4, fell 3.7%, in line with expectations.
Strong sales of beauty products partially offset weakness in discretionary items such as home entertainment, furniture and appliances. Apparel sales were a bright spot, the company said.
Target CEO Brian Cornell said, “Our first quarter financial performance was in line with our expectations for both revenue and bottom line, and continues on the trajectory we had planned for this year. “We aim to return to growth in the second quarter.”
Target continues to invest in strategy and efficiency initiatives to return to growth and achieve long-term financial goals, while continuing to engage customers through low prices, seasonal selection, ease of use and convenience. We plan to take it back,” the CEO added. .
The company is maintaining its full-year targets, with sales expected to be flat to 2% higher and earnings per share in the range of $8.60 to $9.60.
“We remain cautious on our near-term growth outlook and expect consumer discretionary spending trends to remain pressured in the near term,” Target’s chief growth officer Christina Hennington said in a media call.
Target shares closed at $143.27 per share, down 8 percent from Tuesday’s closing price.
With post wire
