Target is one of those retailers that some of us like to go to for a pick-me-up. The bright lights and wide aisles invite you to "treat yourself," even during the holidays when we're also buying for everyone on our list. But now, new data shows that some customers are actually turning away from the retailer's alluring atmosphere ahead of the holiday shopping season. Read on to find out why shoppers are abandoning Target.
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Sales and revenue were down.
iStock / hapabapaEarlier this week, Target released its third-quarter earnings report, which revealed that comparable sales (same-store sales) were down by 4.9 percent when compared with the same period in 2022.
The retailer's total revenue of $25.4 billion was also down, falling 4.2 percent compared with the same time last year. According to Forbes, this is the second quarter in a row that it's had year-over-year sales declines, and results represent Target's worst third-quarter sales since 2021.
Digital sales also took a hit, declining by 6 percent compared with the same period in 2022.
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People are still focused on necessities, not discretionary items.
ShutterstockAccording to CNBC, like so many other retailers, Target is still facing difficulties with customers spending less on discretionary items. (Per the press release, Target actually reported a 19 percent decrease in this category during the last quarter.) Instead, Americans are bargain-hunting and focusing more on necessities, executives said.
During a Nov. 15 earnings call, Target CEO Brian Cornell also noted that when customers do buy new items, they're now waiting until they really need them. Instead of buying a new pair of jeans ahead of the fall, for example, shoppers are waiting until it's actually cooler out, he explained.
"This is a clear indication of the pressures they're facing as they work to stretch their budgets until the next paycheck," Cornell said on the call.
Still, the retailer's chief financial officer Michael Fiddelke added that Target is "laser-focused on moving both traffic and sales back into positive territory"—and they remain hopeful about shopping for and celebrating "seasonal moments."
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Target actually beat analysts' predictions during the last quarter.
Sundry Photography / ShutterstockEven though sales continue to slip, Target still beat Wall Street's estimates for earnings and revenue. According to The Wall Street Journal, company earnings grew by 36 percent to $971 million in the third quarter, which was significantly higher than analysts' predictions of $685 million. According to executives, this was accomplished thanks to better inventory and expense management.
The 4.9 percent fall in same-store sales was also better than the 5.3 percent drop analysts predicted. While almost every category faced a decline, in the press release, Target noted that these slumps "were partially offset by continued growth in frequency categories, most notably Beauty."
Target's stock prices also jumped on Wednesday, which was a positive note, as the stock has taken a hit in 2023, Forbes reported.
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Target is proceeding with caution going into the holidays.
ShutterstockConsidering last quarter's numbers and the fact that shoppers are actively tightening their belts, Target is taking a cautious outlook for the 2023 holiday season. The company is predicting that comparable sales will fall once more "around a mid-single digit decline," similar to the third quarter.
According to WSJ, Target's results over the next few months depend on how successful its "value marketing" has been, namely its advertisement of "affordable joy" with gifts under $25. However, this might be difficult with competition from off-price retailers like T.J. Maxx and HomeGoods, which saw upticks in same-store sales during the third quarter, WSJ reported.
