Target Corp. (TGT.N) anticipated a second-quarter sales decrease and a profit below Wall Street projections on Wednesday as shoppers shun non-essentials like gadgets and home items due to rising pricing.
On Wednesday, the big-box retailer’s shares sank 3% in premarket trade, while Walmart (WMT.N) lost 1%. Target forecast adjusted profit between $1.30 and $1.70 per share, below current quarter projections of $1.93.
It predicted a low-single-digit fall in comparable sales compared to Refinitiv’s 0.25% growth.
“Right now (the American consumer is) spending more due to inflation, saving less and delaying major purchases,” Chief Growth Officer Christina Hennington said in a media teleconference.
The corporation also warned that theft and organized crime might cut profits by $500 million this year compared to 2022.
Target has been shifting its focus to household staples and groceries as sticky inflation and increasing borrowing rates force shoppers to trade down. Still, its merchandise remains skewed to discretionary things.
After surpassing first-quarter results, the business maintained its 2023 profit forecast. According to the business, beauty, domestic, and private-label products were popular.
Target’s disappointing estimate comes a day after major U.S. home improvement retailer Home Depot Inc (HD.N) indicated a steeper-than-expected annual profit decline, setting up a cautious run-up to Walmart’s earnings on Thursday.
Target’s first-quarter gross margin rose to 26.3% from 25.7% due to lower freight costs and fewer clearance reductions.
Digital sales fell unexpectedly, although comparable sales rose 0.7%.
Chief Financial Officer Michael Fiddelke said discretionary pressure offset good development in core businesses.
“We are confident that the economy and consumer will stabilize overtime and will once again benefit from growth in that (discretionary) portion.”
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