In the first quarter, Target Corp. shoppers visited stores more but spent less per visit for softer year-over-year earnings and flat comparable sales during a period still strong enough for Target to top Wall Street estimates.
The company is adjusting operations to emphasize its value proposition even as it looks to keep on-trend goods flowing to consumers, yet it also has been forced to make some difficult choices because of organized retail crime.
Net earnings were $950 million, or $2.05 per diluted share, versus $1.01 billion, or $2.16 per diluted share, in the year-prior quarter, the company maintained.
Target took no adjustment to earnings per share in the period while diluted earnings per share in the year-earlier quarter were $2.19 after a three-cent adjustment for one-time events.
Target beat a Yahoo Finance-published analyst consensus estimate of $1.76 and a revenue estimate of $25.29 billion.
Target total sales reflect flat comparable sales combined with revenues from new locations. Traffic grew 0.9%, on top of 3.9% in the 2022 first quarter as consumers visited stores more but spent less, Target indicated. Comparable store sales grew 0.7%, offset by a decline in comp digital sales. In digital sales, same-day services saw mid-single-digit growth led by high-single-digit growth in drive-up.
Total revenue was $25.32 billion and total sales were $24.95 billion versus $25.17 billion and $24.83 billion, respectively, in the year-previous quarter. Operating income was $1.33 billion versus $1.35 billion in the period a year before.
In a conference call, Target chairman and CEO Brian Cornell (pictured above) said although discretionary categories lagged in the first quarter as inflation and other economic circumstances pressured consumers, Target was ready to approach consumers touting the value element in its assortment while keeping the product presentation fresh and maintaining inventory discipline.
“Our cautious posture has not reduced our commitment to offering fresh on-trend merchandise throughout the year,” Cornell said. “We know that newness is a critical element of what our guests expect when they shop with us, and, even if they manage their household budgets and make disciplined buying choices, our guests continue to respond when we offer the right combination of newness, trend-right fashion and affordability.”
Cornell made the point that shrink has become a greater concern for Target.
“Theft and organized retail crime are increasingly urgent issues impacting the team and our guests, and other retailers,” Cornell said.
He noted violent incidents related to retail crime are increasing at Target and throughout retail. The company has been investing to protect employees and guests, installing fixtures to protect merchandise and adjusting the assortment in most affected stores. Still, he added that Target expects shrink to reduce its profitability by $500 million more than it did in 2022. Cornell said Target will be doing its best to keep stores open in communities where shrink is worst, and it is working on influencing public policy as regards dealing with retail crime.
In announcing the financial results, Cornell said, “We came into the year clear-eyed about the challenges consumers are facing, and we were determined to build on the trust we’ve established with our guests. It required agility and the ability to flex across our multi-category portfolio as we lean into value and the product categories our guests need most right now. Thanks to the team’s dedication, we saw an increase in guest traffic in Q1, with total sales increasing and profitability ahead of expectations.”