Target says sales slumped amid spike in violent in-store thefts
Target's second-quarter sales were hit by inflation and a negative reaction by some customers, widely publicized on social media, to its Pride merchandise.
However, company leaders are also citing a different threat as well. The Minnesota-based retail giant says it's seeing a huge spike in dangerous situations inside its stores.
Target says violent thefts and threats of violence rose an eye-opening 120% during the first five months of this year. Specifically, CEO Brian Cornell cited "organized retail crime" as a culprit.
"We're working hard both inside our stores and with government and community partners to achieve lower loss rates over time, and our long-run expectation is that shrink rates will moderate from today's unsustainable levels," CFO Michael Fiddelke said. "But so far, we've only seen indications that loss rates might soon be reaching a plateau but have not yet seen evidence that loss rates will begin to come down."
Target was among the companies most notably hit by a backlash for its LGBTQ+ support, and in particular, its displays of Pride Month merchandise. It pulled some items and made other changes after encountering hostility from some customers who confronted workers and tipped over displays. Company executives told reporters on the call that it couldn't tease out how much the negative reaction had on its business, but once it made the changes, those incidents subsided. Overall sales improved in July from June.
Cornell said that 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.
Inflation's effect
Target is among the first major U.S. retailers to report quarterly financial results and the impact of rising prices and elevated interest on its customers will get a lot of attention ahead of a raft of quarterly reports from companies like Walmart other retailers.
CEO Brian Cornell said higher high prices for food and household essentials are taking a bigger chunk out of the paychecks of customers, who have also pulled back on buying some goods in favor of travel or spending time out of the house in other ways.
"Guests are out at concerts," Cornell said. "They're going to movies. They've seen 'Barbie.' They're enjoying those experiential moments, and they're shopping very carefully for discretionary goods."
Other retailers are seeing the same thing.
Home Depot, the nation's largest home improvement retailer, reported Tuesday second-quarter results that topped profit and sales expectations, but its sales continued to decline. The company said that it's seeing weak sales in certain big-ticket items like patio furniture and appliances, noting that customers are still spending on smaller home-improvement projects.
Walmart, the nation's largest retailer, reports earnings Thursday. Macy's, Kohl's and Nordstrom post quarterly results later this month.
The reports follow the latest government snapshot on retail sales that showed that Americans increased their spending last month on clothing, dining out and online goods — a sign that solid consumer spending is still powering a resilient U.S. economy.
