Targeted earnings (TGT) for Q1 2024

Objective on Wednesday, it saw year-over-year sales decline and gave no earnings estimate to Wall Street as consumers tired of high prices bought both fewer discretionary items and groceries.

The Minneapolis-based discount retailer’s fiscal first-quarter revenue was roughly in line with expectations.

Speaking to reporters, CEO Brian Cornell said the company’s results reflected “continued mild trends in discretionary categories.”

He said the company wants to make sure it offers value to customers and communicates that clearly through activities such as its renewed loyalty program. Target also announced Monday that it was cutting prices on thousands of everyday items, including milk, bread, paper towels and diapers.

Target reiterates its earlier full-year forecast, saying comparable sales will range from flat to 2% and adjusted earnings per share will be $8.60 to $9.60. Company leaders said the retailer was on track to return to sales growth in the second quarter.

The company’s shares fell more than 7% early Wednesday.

Here’s how Target reported for the three months ended May 4 compared to Wall Street expectations, based on a survey of analysts conducted by LSEG:

• Earnings per share: USD 2.03 against expected USD 2.06

• Income: $24.53 billion against the expected $24.52 billion

For the first time since November 2022, Target missed earnings expectations.

Target’s net income for the period declined less than 1% to $942 million, or $2.03 per share, from $950 million, or $2.05 per share, in the year-ago quarter.

Total revenue was down about 3% from $25.32 billion in the prior year.

Like other retailers, Target has tried to win over consumers who don’t spend money as freely on clothes, household items and other discretionary items. Low-cost fancy food retailing has been particularly affected by this dynamic, as it receives less sales from food sales compared to its competitor Walmart, which derives about 60% of its U.S. sales from groceries. For comparison, at Target it’s about 20%.

Inflation declined slightly in April, but the Consumer Price Index still rose 3.4% year-on-year. The key metric is measuring the cost of goods and services at the cash register.

Target has taken this challenge into account with price cuts this week.

The company also competes with other discount stores, including: with Walmart, Aldi and Lidl chase bargain-hunting customers.

For example, Walmart has gained market share from higher-income customers and recently introduced a premium food brand in which most products cost less than $5. The company’s chief financial officer, John David Rainey, also said last week that customers were turning to store shelves for cheaper meals because of rising fast food prices.

In Target’s first quarter, customer traffic, which includes online and stores, fell 1.9%. The average amount customers spent on these visits also decreased by 1.9%.

Sales of digital solutions increased by 1.4%. This was the first increase in digital sales in over a year.

Comparable sales, also called same-store sales, fell 3.7% as shoppers bought cosmetics but less of other established categories such as clothing and home goods. According to StreetAccount, this decline was in line with analyst expectations.

Discretionary items weren’t the only part of the store under pressure. Sales in the frequency, food and beverage and beauty and household categories fell by single digits, chief growth officer Christina Hennington said on a call with reporters.

Still, Hennington said Target is seeing some encouraging trends compared to recent quarters. Apparel sales improved nearly 4 percentage points from the fiscal fourth quarter as customers shopped for spring outfits.

She said Target’s limited-time collection with Diane von Furstenberg drove millions of unique visits to the retailer’s website every day during the launch week and increased customer basket sizes by about 15% on average.

She said other unique items also increase expenses. These included a partnership with tennis and lifestyle brand Prince to sell pickleball equipment and Taylor Swift’s latest album, which Target leveraged through in-store events and photo shoots.

Target shares closed at $155.78 on Tuesday, increasing its market value to $72.07 billion. As of Tuesday’s close, the company’s shares are up about 9% this year, lagging the S&P 500 Index’s nearly 12% gain.

– CNBC’s Robert Hum contributed to this report.