But Target reported that its price cuts did little good: It ended the quarter with 1.5% more inventory than three months earlier and 36% more than a year ago.
The company said it has reduced the amount of discretionary items in warehouses, but Target noted that sales of those items are “putting significant pressure on our near-term profitability.”
Revenues plummet, again
Target’s quarterly net income declined to $183 million, significantly lower than $1.8 billion in the same period a year ago.
In addition, adjusted earnings of 39 cents per share were well below the 72 cents forecast by analysts polled by Refinitiv. Revenue of $26 billion was slightly higher than a year ago and roughly in line with forecasts.
‘Feel the impact of inflation’
The environment for Target and similar retailers remains “challenging,” CEO Brian Cornell told investors on Wednesday. But Target sees “an encouraging start to the back-to-school” shopping season, he said.
He believes the blow to earnings in the past quarter should not be repeated: “The high-level story is, the vast majority of the financial impact of these stock moves is now behind us.”
Still, it is a difficult time to be a retailer, given the unpredictability of consumer spending and the effect of macro factors such as inflation.
Target’s heavier reliance on discretionary vs. Walmart
These trends hit Target harder than rival Walmart, which gets a larger portion of its sales and profits from essentials like groceries. Target usually depends more on those discretionary items.
Walmart has a reputation for offering the lowest prices at major retailers in many categories, but in Tuesday’s earnings report, the company said sales to middle and higher income buyers have increased.
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