By Sarah Nassauer
Target’s annual revenue declined for the first time in seven years, as the retailer struggled to entice shoppers to splurge on discretionary items like home goods and electronics.
The company has been battling the effects of weaker traffic to its stores and shoppers spending a bigger chunk of their budgets on food and other essentials. On Tuesday it said revenue in the year ended Feb. 3 was $107.41 billion, down 1.6% from the previous year.
Target earns most of its sales from nonfood items, in contrast to competitors such as Walmart, the country’s largest grocer. While inflation is cooling, especially in some nonfood categories, it has been 30 years since food costs have accounted for such a high percentage of Americans’ spending, according to government figures.
Target’s weakness comes as some competitors are growing at a faster clip, including Amazon, Walmart and Costco. Each of those companies has recently attracted more shoppers looking for fast shipping or deals on food and other essentials, executives have said.
Target has also dealt with its own missteps. The retailer angered shoppers over certain products being sold for LGBTQ Pride month and its response to the blowback, further hurting revenue.
The company spent months working through an inventory glut after previous supply chain snarls lifted just as demand dropped. That situation improved throughout the year, the company said Tuesday, with balanced inventory levels that help reduce the need to discount and keep items in stock.
Target is hosting an investor day Tuesday during which executives are expected to discuss the company’s latest financial report and its outlook for the year. For now, they are bracing for slower sales for the next few months before improving in the second half of 2024.
Overall, comparable sales, or those from stores and digital channels operating for at least 12 months, are expected to be flat to down 2% from 2023. Target is betting that a refreshed loyalty program and gains from its private brands can help it land more shoppers.
Retailers including Walmart and Amazon had strong performances during the holiday season, but the picture for Target was mixed. Comparable sales fell 4.4% in the latest quarter. The number of visitors to stores and digital channels fell 1.7%.
However, Target boosted its profit by offering fewer discounts and benefiting from lower freight, supply chain and digital fulfillment costs. It also had stronger sales of some higher-margin items. Net earnings in the quarter rose 58% to $1.38 billion.