Aim On Tuesday he warned that he expects a “significant” fall in the first quarter gains compared to the period of the previous year, since he maintains with the “uncertainty of the current consumer”, soft sales in February and concerns about tariffs.
The first three months of the year tend to be slow for retailers because consumers generally withdraw after the Christmas shopping season. But Target's warm guide comes later Walmart and Elfa beauty He raised concerns last month about a slower year than usual.
When they attach these weak forecasts with a more clear decrease than expected in consumer spending in January and the greatest fall in consumer confidence since 2021 in February, the Target guide is the last warning signal on the health of the consumer and the US economy.
Many of Target's problems have been self-inflicted in recent years, but as a big-box retailer who attends to large stripes of the population, their performance can offer information on expenses patterns ahead, especially when other companies have made similar comments.
In a statement, Target Chief of Finance, Jim Lee, said that February sales were “soft” and “decreased consumer confidence” damaged discretionary sales. He also blamed the “unusually cold climate,” saying that he affected clothing sales.
“We hope to see a moderation in this trend as clothing sales respond to the warmest climate throughout the country, and consumers resort to the goal for the next seasonal moments such as Easter holidays,” Lee said. “We will continue monitoring these trends and we will remain properly cautious with our expectations for next year.”
The CEO of Target, Brian Cornell, also told CNBC that the rates of 25% of President Donald Trump about Mexican imports that take effect on Tuesday could force the company and other supermarkets to increase the price of products such as bananas, strawberries and avocados in the coming days.
Beyond his perspective, Target reported fiscal profits and income from the fourth quarter that exceeded the expectations of Wall Street.
This is how Target did compared to what Wall Street was anticipating, based on a LSEG analysts survey:
- Profit per action: $ 2.41 vs. $ 2.26 expected
- Revenue: $ 30.92 billion compared to $ 30.82 billion expected
The net income of Target for the three -month period that ended on February 1 was $ 1.10 billion, or $ 2.41 per share, compared to $ 1.38 billion, or $ 2.98 per share, a year earlier.
Sales fell to $ 30.92 billion, approximately 3% of $ 31.92 billion the previous year. In the period of the previous year, Target benefited from an extra week, which has biased comparisons year after year.
For its current fiscal year, Target expects the profits per share between $ 8.80 and $ 9.80, which is more or less in line with estimates of $ 9.31, according to LSE. However, it expects sales to grow only 1%, far behind estimates of 2.6%, according to LSE.
The Target's first quarter guide will also probably surprise investors. Although he refused to share specific figures, Target said he expects “to see a significant proficiency pressure year after year in his first quarter in relation to the rest of the year.” Meanwhile, analysts expected profits to grow 0.9%, according to LSE.
In the period prior to the Target Profit Report, the retailer increased his comparable sales orientation for the fourth quarter of January after he saw constant traffic during the crucial months of Christmas purchases, but remained in his earning guide, indicating that he depended on agreements and discounts to boost sales.
That strategy finally affected the profits. During the quarter, Target's gross margin fell approximately 0.4 percentage points due partly to “higher promotional and authorization rates,” he said in a press release.
Target, who has attracted buyers for a long time with their wide range of discretionary goods, has struggled to win consumers with these pleasant articles in the midst of persistent inflation, high interest rates and a strong competition of online discounts and their rival Walmart. This change in the mixture has harmed the objective because discretionary merchandise tends to be more profitable than selling than the essential elements of the home such as groceries and toothpaste.
The company has said that it has been able to boost the impulse when it offers a new striking merchandise, such as fresh training equipment, accessories for pets or seasonal food flavors.
For example, customers appeared and spent when Target began selling Leggings of All in Motion, who came in bright colors and bright patterns, for $ 25, said commercial director Rick Gómez to CNBC in an interview last month. They also responded well when Target redesigned the fasteners of their intimates and the sleeping clothing line, Auden.
“When we have a style novelty, in trend, at affordable prices, the consumer is willing to buy,” Gomez said.
During the fourth quarter, sales trends comparable in clothing grew by almost 4 percentage points compared to the third quarter and target is looking to sustain That impulse. At the end of February, Target said he was associating with Champion and Warby Parker, which will make both brands appear in Target and online stores.
As part of its several years with Champion, Target will carry an exclusive line of sportswear that is designed more to rest and live, instead of adequate gymnastics clothes. With Warby Parker, Target will open five stores in the stores and start offering the products of the online glasses, with a larger deployment planned for next year.
The associations are designed to attract buyers with fresh goods, bring new customers and position a goal to compete against their rivals, but it can spend some time before these offers begin to bear fruit.
Although the agreements were announced at the beginning of the year, they will not officially launch until the second half of 2025.
