Target Corporation has just announced a historic collapse in sales for the first quarter of fiscal 2023. They announced a negative 2.8% decrease, taking total sales to $23.85 billion. This number was below Wall Street’s expectations, which had predicted sales to be $24.23 billion, according to FactSet. The troubling quarter underscores a tough road ahead for the retailer as it continues to adjust to the needs of a more online and cost-conscious consumer.
Beyond the broader sales decline, Target reported that same store sales were down 3.8%. Sales at both e-commerce and brick-and-mortar stores declined by 2.4%. On top of this, the average ticket size dropped, down 1.4%. These numbers are a stark reversal from last year’s sales. During that same timeframe, Target said it earned $24.53 billion in sales.
Target’s new leadership, particularly the chief executive Brian Cornell, has been forthright about the tough financial environment. The company has raised its guidance for 2025, now anticipating a low-single-digit sales decline. That’s a drop from previous forecasts that had called for a 1% rise in March. This change is indicative of the larger economic conditions affecting consumers’ ability to spend money.
To address the current challenges, Target has forecasted annual per-share earnings between $7 to $9, excluding any gains from legal settlements. The company’s made aggressive and intentional moves at the strategic enterprise level to downshift their national organizational structure. Christina Hennington, current Chief Strategy and Growth Officer, will make the transition to strategic adviser. As such, this move is a significant piece of the company’s reorganization plan.
Back in January of this year, Target made moves to downsize their slate of diversity, equity, and inclusion (DEI) programs. This included gradually eliminating programs designed to help Black employees gain job skills and advance in their careers and to support the development of Black-owned businesses. These rulings fit into the company’s overall effort to redirect company focus and efforts amid mounting financial constraints.
While navigating these headwinds, Target is launching new products – with an eye on affordable price points. The retailer’s initial rollout will feature 10,000 new products that start at $1, with more than half of the company’s selection available for under $20. The company recently fought against increasing costs associated with tariffs. In response, it has significantly increased prices on many products and expects to raise prices even more this coming summer.
In the competitive retail landscape, Target is gaining or maintaining market share in only 15 out of 35 merchandise categories. The company’s leadership knows they need to move extremely quick to bring customers back into brick-and-mortar stores and online marketplaces.
“I want to be clear. We’re not satisfied with these results, so we’re moving with urgency to navigate through this period of volatility … We’ve got to drive traffic back into our stores or visits to our site.” – Brian Cornell
As Target’s CEO Brian Cornell said, “our focus and willingness to adapt was required to match the competition by sharpening our pricing strategy.”
“We look at competition. We make adjustments literally each and every week, so we’re constantly adjusting pricing. Some are going up. Some will be reduced.” – Brian Cornell
Target is getting ahead with a bold strategy to address changing market conditions. At the same time, they are trying to restore consumer confidence and increase store visitation.
