Post by : Badri Ariffin

Minneapolis-based retail giant Target reported a sharp decline in third-quarter profits, signaling mounting challenges as it battles high inflation and cautious shoppers. The retailer’s profit for the period ending November 1 fell to $689 million, down 19% from $854 million last year, reflecting a turbulent retail environment.

Sales also slipped 1.5% to $25.27 billion, falling slightly short of analysts’ expectations. Comparable sales, tracking existing stores and online channels, dropped 2.7%, marking the third consecutive quarterly decline. Essential categories like food and beverages posted gains, but discretionary items—including apparel and home décor—continued to struggle as consumers prioritize essentials over seasonal splurges.

Strategic Moves to Revive Shopper Interest

Target is taking aggressive steps to reverse the slump. The company plans to spend an additional $1 billion next year on store remodels and expansions, bringing its total investment to $5 billion. It has also slashed prices on thousands of food and household essentials and introduced more than 20,000 new products, double the count from last year.

In October, Target cut approximately 1,800 corporate positions, roughly 8% of its headquarters workforce, in a bid to streamline decision-making and accelerate initiatives aimed at boosting customer engagement.

Challenges Beyond Inflation

The retailer faces hurdles beyond shifting consumer habits. Public boycotts, triggered by the scaling back of corporate diversity and inclusion programs, and ongoing economic pressures—including federal shutdown impacts, tariffs, and workforce shortages—have compounded difficulties.

Even holiday events show changing consumer behavior. During Halloween, for instance, shoppers bought candy and costumes but spent less on decorations. Experts expect similar prioritization for the winter holiday season, focusing on “what goes under the tree” rather than “what goes on the tree.”

Target’s incoming CEO, Michael Fiddelke, steps in February with a challenging task: reviving sales and restoring the brand’s appeal as a destination for stylish yet affordable products. For the fourth quarter, the company anticipates low single-digit declines in comparable sales, and full-year earnings per share are now expected to range from $7 to $8, down from the earlier $7 to $9 forecast.

The retailer is also embracing technology, partnering with OpenAI to allow shoppers to browse Target items via ChatGPT, with purchases directed to the Target app, blending digital convenience with in-store accessibility.

#Business News #Economic