Target wrestles with pullback in spending and theft that may cost retailer more than $1B this year
NEW YORK (AP) — Target on Wednesday reported another quarterly profit decline and issued a cautious sales and profit outlook for the current period.
The Minneapolis company is dealing with rising costs, which includes rising theft as a big factor, and consumers who have become more cautious about spending.
The company still topped Wall Street expectations and stuck to annual profit guidance above industry analyst projections.
Target is among the first major U.S. retailers to report quarterly results, and a lot of attention will be paid to the impact that stubbornly high inflation and tightening credit are having on customers. Walmart, the nation’s largest retailer, reports earnings Thursday. Macy’s, Kohl’s and Nordstrom post quarterly results later this month.
Home Depot, the nation’s largest home improvement retailer, said Tuesday that sales for the first quarter fell 4.2%, and it expects its first annual revenue decline since 2009. Also on Tuesday, U.S. data showed that Americans picked up their spending modestly last month, buoyed by a solid job market and a retreat in prices for some things. But it also revealed how Americans are barely keeping up with inflation.
First-quarter net income slipped nearly 6% to $950 million, or $2.05 per share, for the three-month period ended April 29. That compares with $1.01 billion, or $2.16 per share, in the year-ago period.
Sales rose 0.6% to $25.32 billion in the quarter, up from $25.17 billion in the year-ago quarter. Analysts expected earnings of $1.77 per share on $25.26 billion in sales in the latest period, according to FactSet.
It’s the fifth-consecutive quarter that the retailer’s profit has slipped, although it was much smaller this time. Target reported a 43% drop in profits for the fourth quarter, a 52% drop in third-quarter profits, 90% in the second quarter and a 52% decline in last year’s first quarter.
Target earnings per share to be in a range from $1.30 to $1.70 in the current quarter. Analysts were expecting $1.95 per share, according to FactSet. For the full year, the company is maintaining its prior guidance of $7.75 per share to $8.75 per share. Analysts are expecting $8.36 per share, according to FactSet.
Target said theft is cutting into its bottom line and it expects related losses could be $500 million more than last year, when losses from theft were estimated to be anywhere from $700 million to $800 million. So that means losses could top $1.2 billion this year. The company said it’s seeing an increasing number of violent incidents at stores as well, but does not want to close stores and is expanding security and locking up some items.
Retailers are being hit with a rash of thefts and in some case, closing stores and pulling out of locations because of massive losses, some tied to criminal gangs. The issue has received more notice in the past few years as high-profile smash-and-grab retail thefts and flash mob robberies have garnered national attention.
First-quarter comparable sales — or those from stores or digital channels operating for the past 12 months — were flat compared with the year-ago period. That’s bit of a slowdown from the 0.7% growth in the previous quarter. Customer traffic was up. Shoppers are focused on buying necessities like groceries over non-essentials, but they still rely on Target for affordable, trendy fashions.
Comparable stores sales grew 0.7% but comparable online sales declined.
“We came into 2023 clear-eyed about what consumers were facing with persistent inflation and rising interest rates,” CEO Brian Cornell said during a media call Tuesday.
Given this competitive environment, Target is continuing to make investments in stores and online.
The discounter said in early March that it plans to invest as much as $5 billion this year expanding services for customers, including a drive-up service for returns, renovations at 175 stores and improvements in online shopping.
Target’s shares rose roughly 1% at the opening bell.
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This story and headline has been corrected to show that Target is predicting more than $1 billion in losses from theft this year.
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