US retail giant Target has reported another quarter of declining sales and profits, as the retailer struggles to regain its footing with customers grappling with widespread price increases.
However, the Minneapolis-based company offered a solid annual profit outlook that exceeded Wall Street’s projections, causing its shares to surge by more than 4 per cent before trading commenced.
The company also stated its belief that net sales will grow every quarter this year, alongside an increase in comparable-store sales at the start of the current quarter.
For the three months ending 31 January, Target earned $2.30 per share, or $1.05 billion. This compares to $1.10 billion or $2.41 per share, during the same period last year.
Adjusted earnings per share for the most recent quarter stood at $2.44.
Sales fell 1.5 per cent to $30.45 billion during the latest period. For the full year, sales fell nearly 2 per cent to $104.78 billion. Analysts were expecting $2.16 per share on sales of $30.46 billion, according to a survey by FactSet.
Comparable sales — sales at established stores and online channels — fell 2.5 per cent, followed by a 2.7 per cent dip in the fiscal third quarter. The latest figure marks 11 quarters out of the past 13 that Target has posted either declines or flattish growth for this measure.
Target’s performance underscores the challenges faced by new CEO Michael Fiddelke, a 20-year company veteran, who succeeded longtime CEO Brian Cornell last month.
Fiddelke is expected to reveal details about his plans to turn around Target on Tuesday during the company’s annual meeting in Minneapolis. Investors are hungry for a return to Target’s former dominance in affordable chic for which it earned it the nickname “Tarzhay” in years past.
Fiddelke takes over with Target’s hometown of Minneapolis a front line of sorts in President Donald Trump’s campaign to curb illegal immigration.
Some of the company’s stores have become a flashpoint in a pushback against U.S. Immigration and Customs Enforcement. The company has faced pressure to take a public stand against the immigration crackdown.
Even before the immigration clashes, Target had been facing protests and boycotts over the company’s decision to roll back its diversity, equity and inclusion initiatives.
Critics believe it’s a betrayal of Target’s retail giant’s philanthropic commitment to fighting racial disparities and promoting progressive values in liberal Minneapolis and beyond.
That is outside of a volatile economic and political environment that has been intensified by an aggressive trade campaign under Trump.
The White House is now seeking a global tariff of 15 per cent, after the U.S. Supreme Court struck down many of the far-reaching taxes on imports that he had imposed over the last year.
While the pace of inflation has cooled, consumer prices have soared about 25 per cent over the past five years. U.S. companies are facing a hazy outlook with American households hurting, and the Trump administration is trying to work around the Supreme Court ruling to keep his duties in place.
And Target customers have soured on what they see as untended and messy stores with lackluster merchandise.
As the company’s nearly 2,000 store locations have become shipping hubs for online operations, customers say the shopping experience within stores has suffered with staff fulfilling digital orders rather than tending to store aisles.
Target is also facing stiffer competition from Walmart, which has stepped up its focus on fashion and other goods. As many Americans trade down because of inflation, Walmart has gained market share, particularly among households with annual income above $100,000.
Joe Feldman, a senior managing director and the assistant director of research at Telsey Advisory Group, believes that shopper boycotts over its pullback from DEI and its lack of a forceful stand against ICE cut into sales.
But he said overall, Fiddelke seems to be willing to make changes to improve its operations.
Fiddelke has already reshuffled the leadership team at Target, boosted spending on in-store store staffing and made cuts at distribution facilities and regional offices, according to a memo sent to employees in February.
The company is also reworking its store label brands such as its home goods brand called Threshold and announced a merchandise collaboration with Roller Rabbit, a brand known for its 1960s-inspired silhouettes and colorful playful prints.
The collection of clothing, pajamas and accessories is expected to make its debut at Target this month for a limited time.
Tuesday’s report offered some hopeful signs for the business. Target said that sales and customer traffic accelerated in the final two months of the quarter. And it saw sales growth in food and beverage, beauty and toys for the latest quarter.
Target said that it expects net sales for the year to increase by 2 per cent, which would mean it expects sales to reach $106.88 billion. That’s a bit above analysts’ expectations of $106.7 billion. Target also anticipates earnings per share to be in the range of $7.50 to $8.50. Analysts are expecting $7.30 per share for the year, according to analysts polled by FactSet.
