Products sit on display at a Target store in Edina, Minn., on Monday.Anne D'innocenzio/The Associated Press
Target TGT-N reported another quarter of declining sales and profits as the retailer struggles to regain its footing with its customers contending with higher prices almost everywhere.
But the Minneapolis company on Tuesday offered a solid annual profit outlook that was better than Wall Street had been projecting, It also said it believes net sales with grow every quarter this year.
Target also said comparable-store sales rose to start the current quarter.
Shares jumped more than 4 per cent before the opening bell.
The company earned US$2.30 per share, or US$1.05-billion, for the three-month period ended Jan. 31. That compares with US$2.41 per share, or US$1.10-billion, during the year-ago period. Adjusted earnings per share for the most recent quarter was US$2.44.
Sales fell 1.5 per cent to US$30.45-billion during the latest period. For the full year, sales fell nearly 2 per cent to US$104.78-billion.
Analysts were expecting US$2.16 per share on sales of US$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.
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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 lacklustre 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 US$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 colourful playful prints. The collection of clothing, pyjamas 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 US$106.88-billion. That’s a bit above analysts’ expectations of US$106.7-billion. Target also anticipates earnings per share to be in the range of US$7.50 to US$8.50. Analysts are expecting US$7.30 per share for the year, according to analysts polled by FactSet.