Target’s Q1 Sales Slide To $24.1 Billion As Consumers Cut Spending

Target Corporation’s first-quarter comparable sales fell by 3.7% following a full-year decline in 2023. This has put the near-2,000-door retailer on high alert with actions in place designed to rebuild customer traction as the company approaches the summer season. Net income was also slightly down to $942 million and markets reacted in morning trading by wiping 8% off the stock by 10 a.m.

While the year-over-year revenue slide to $24.1 billion (from $24.9 billion) was in line with expectations, consumers are shopping less in discretionary categories and focusing on essentials instead. In this environment, Walmart
Walmart
seems to have weathered the first three months a little better. The retailer’s share price has also risen by 24% this year to date.

For Target
Target
, beauty partially offset the lower spending in other areas in Q1. Digital was also up by 1.4%, and same-day services rose by 9%, led by 13% growth in the drive-up business, suggesting that shoppers are still willing to pay for convenience. In the quarter, digital increased its share of Target’s revenue to 18.3% versus 17.5% in Q1 2023.

In a statement, Target Corporation’s CEO, Brian Cornell, said: “Our top-line performance improved for the third consecutive quarter, with growth in our digital business led by strength in our same-day fulfillment services.”

Lower prices promise

He added that revenue was “tracking the trajectory we outlined for this year” and that he expected a return to growth in the current quarter. Looking ahead to the rest of the year, the CEO is hoping that lower prices and more relevant seasonal assortments will bring back shoppers. In Q1, traffic was down by 1.9% as were average transactions.

On Monday, Target said it would cut prices on approximately 5,000 frequently bought items across its range to boost demand, starting with an initial 1,500 now in time for the Memorial Day weekend and beyond.

Savings will be available on products such as milk, meat, bread, soda, fresh fruit and vegetables, snacks, yogurt, peanut butter, coffee, diapers, paper towels, and pet food. The reductions will also apply to Target’s owned brands like Good & Gather and Everspring. The company said that the price cuts “will collectively save consumers millions of dollars this summer.”

“We know shoppers are feeling pressured to make the most of their budgets. These lower prices across thousands of items will add up to big savings,” said Rick Gomez, Target’s executive vice president and chief food, essentials, and beauty officer.

One million new loyalty members

Target is offering further value via the recent relaunch of the free-to-join Target Circle loyalty program. The revamped scheme is being heavily promoted and signed up almost a million new members in the first quarter according to Target’s recently promoted COO Michael Fiddelke.

On the widespread issue of theft, Target has taken steps to combat it. Fiddelke told analysts in an earnings call this morning: “We continue to believe that shrink rates are positioned to reach a plateau this year. As a result, we expect to see a full-year, gross margin rate benefit related to shrink, most notably in the second quarter.”

Inventories have also been addressed and by the end of the first quarter they were lowered by 7%. Meanwhile in-stock levels, particularly on faster moving goods, were increased which is helping profitability.

If all these measures, together, work reasonable well, Target should see discretionary spending trends improving throughout the rest of the year—though the pace will be slow. For the second quarter, the retailer expects a 0-2% increase in comparable sales, the same as it is forecasting for the full year.