Target Set To Post First Quarterly Revenue Drop In Six Years As Consumers Cut Spending
Target Corp is projected to report its first quarterly decline in revenue in approximately six years, a consequence of the major retail chain being affected by a change in consumer spending patterns, which has shifted away from discretionary goods and toward services.
In recent months, consumer expenditure has been directed more towards services like travel and entertainment, while trimming spending on non-essential purchases such as clothing and home goods due to the prevailing high levels of inflation.
According to Edward Jones analyst Brian Yarbrough, Target is anticipated to face a more pronounced impact in comparison to its counterparts due to its substantial involvement in consumer discretionary products.
This has led to at least 16 analysts reducing their price targets for the retailer since the start of June. Target’s merchandise lineup is heavily weighted towards discretionary items like clothing, electronics, and beauty products.
In May, the company had issued a warning about the bleak prospects for its second-quarter results, attributing the caution to inflation pressures prompting consumers to steer clear of non-essential products.
Notably, both Mastercard and American Express observed a slowdown in purchases of high-value items during their recent quarters, even as spending on travel and entertainment remained resilient.
An additional factor expected to impact second-quarter sales is the recent controversy surrounding its Pride collection.
Adding a note of caution, Jessica Ramirez, senior analyst at Jane Hali & Associates, emphasized that customers might not necessarily allocate extra funds to items that may not see practical use or necessity during the upcoming back-to-school season.
In another development, it has recently introduced the Starbucks menu to its Drive Up service after a successful testing phase.
This nationwide expansion of Drive Up with Starbucks enables shoppers to place orders for Starbucks beverages or food while retrieving their Drive Up orders.
