Target sales affected by pride month backlash

Target’s second-quarter sales were hurt by inflation and some customers’ negative reaction, widely reported on social media, to its Pride merchandise.

The Minneapolis retailer expects high interest rates, which make credit cards more expensive to use, and higher food prices to continue to put pressure on customers, and on Wednesday the chain cut their profit and sales expectations for the year. In lowering its forecast, Target also cited the end of the student loan moratorium, which had given college students a little more financial leeway.

However, profits beat expectations as the Minneapolis chain brought inventories closer in line with precautionary spending on customer discretionary items.

Target is one of the first U.S. retailers to report quarterly financial results, and the impact of higher prices and high interest from its customers will garner much attention ahead of a series of quarterly reports from companies such as Walmart and others. retailers

Chief Executive Officer Brian Cornell said higher prices for food and household staples are taking a larger share of customers’ paychecks, which have also reduced purchases of some products in favor of travel or spend time away from home in other ways.

“The guests come out to the concerts,” Cornell said. “They’re going to the movies. They’ve seen ‘Barbie.’ They’re enjoying these experiential moments and they’re very carefully buying discretionary products.”

Other traders are seeing the same thing.

Home Depot, the nation’s largest home improvement retailer, reported second-quarter results Tuesday that beat expectations for profit and sales, but its sales continued to decline. The company said it is seeing weak sales in certain high-priced items such as patio furniture and appliances, noting that customers are still spending on smaller home improvement projects.

Walmart, the nation’s largest retailer, reports earnings on Thursday. Macy’s, Kohl’s and Nordstrom all report quarterly results later this month.

The reports follow the latest government snapshot of retail sales that showed Americans increased their spending last month on clothing, food and online items, a sign that solid consumer spending is still driving a resilient US economy.

But Target was also hit by another problem: It was one of the companies hit by backlash for its LGBTQ+ support, particularly its displays of Pride Month merchandise. He removed some items and made other changes after encountering hostility from some customers who confronted workers and knocked over displays. Company executives told reporters on the call that they couldn’t figure out how much of a backlash the backlash had on their business, but once they made the changes, those incidents decreased. Global sales improved in July compared to June.

Cornell said the company has learned from the backlash and said it will be more thoughtful in merchandise offerings for its heritage months, which celebrate various ethnic and marginalized groups.

Target’s latest earnings report shows the challenges it faces in keeping up with customer behavior.

Target said it earned $835 million, or $1.80 per share, in the quarter ended July 29. That compares with $183 million, or 39 cents per share, in the year-ago period.

Sales fell nearly 5% to $24.77 billion from $26.04 billion as shoppers focused more on groceries and beauty products rather than discretionary items. Business in the quarter was also hurt as the results were compared with steep discounting in the year-ago period that was meant to clear unwanted inventory.

Analysts had expected $1.43 a share on sales of $25.18 billion, according to FactSet.

Stock at the end of the second quarter was 17% lower than last year, reflecting a 25% reduction in discretionary categories such as fashion and home furnishings.

Comparable sales (those from stores or digital channels operating during the last 12 months) fell 5.4% in the last quarter. In the first quarter, sales were unchanged.

Target now expects comparable sales in a wide range around a mid-single-digit decline for the rest of the year. It also now projects full-year adjusted earnings per share of $7 to $8, down from a previous range of $7.75 to $8.75. Analysts had expected $7.72 per share for the year, according to FactSet.