A Target store in New York.
New York CNN —
Target, a barometer of the American consumer, said its sales last year fell for the first time since 2016. Now it’s predicting a sluggish 2024 as shoppers are weighed down by higher prices.
Target said Tuesday that its sales at stores open for at least one year declined 3.7% last year. Target projects sales to grow by up to 2% this year.
The company’s business has slowed since shoppers stocked up at its stores and online during the height of the pandemic in 2020 and 2021.
Since its surge, Target’s core middle-class customer base has been strained by higher prices and pulled back on discretionary goods, such as home decor, electronics and non-essential clothing. Target’s sales have declined for three straight quarters.
Nevertheless, the company exceeded Wall Street’s sales expectations for the holiday season, and Target’s (TGT) stock surged more than 8% higher Tuesday in premarket trading. Heading into Tuesday, Target’s stock had dropped 43% since its 2021 peak.
Target has slumped because of its merchandise mix and prices compared to rivals like Walmart.
The company stocks more non-essential merchandise compared to competitors such as Walmart(WMT)and Costco(COST). More than half of Target’smerchandise is discretionary — clothing, home decor, electronics, toys, party supplies and other non-essentials. Target in recent years has added more food and essentials to its stores, but still trails Walmart, which gets around half of sales from groceries.
Target’s prices are also higher than Walmart’s. In February, Target’s prices were on average 8.6% higher than Walmart, according to an analysis by RBC Capital Markets analysts.
Store theft and safety have also become bigger concerns at Target.
Target said in October that it’sclosingnine stores in major cities specifically because “theft and organized retail crime are threatening the safety of our team and guests, and contributing to unsustainable business performance.”
But Target’s closures in New York, San Francisco, Oakland, Seattle and Portland may also be due more to the underperformance of Target’s smaller store locations, analysts say.
Target said its shrink costs — losses due to theft, incorrectly-scanned items and other merchandise errors — fell last quarter.
Fierce right-wingbacklash to Target’s Pride Month collectionalso took a toll on the brand last year.
