FILE - A Target logo is displayed outside of a store location, Dec. 20, 2022, in Westwood, Mass. (AP Photo/Steven Senne, File)
NEW YORK (AP) — Sales at Target fell more than expected in the first quarter and the retailer warned they will slip this year as consumers, worried over the impact of tariffs, pull back on spending.
Sales fell 2.8% to $23.85 billion, which is less than the $24.23 billion Wall Street expected, according to FactSet, and down from the $24.53 billion the company reported during the same period last year.
Target said Wednesday that it now expects a low-single digit decline in sales for 2025, and earnings per share, which excludes the gains from the litigation settlements in the first quarter, to be anywhere from $7 to $9.
For the year, analysts expect earnings per share of $8.34 on sales of $106.7 billion.
Comparable sales, those from established stores and online channels, fell 3.8%. That includes a 5.7% drop in store sales and a 4.7% increase in online sales. That reverses a comparable sales increase in the previous quarter of 1.5%.
The number of transactions across online and physical stores fell 2.4%, and transaction amounts dropped 1.4%. Target told reporters on a conference call Tuesday that it couldn’t reliably estimate the individual impact of each of the factors that were hurting its business.
Target said it’s setting up a new office to be led by Chief Operating Officer Michael Fiddelke would focus on making faster decisions to help accelerate sales growth. Current Chief Strategy and Growth Officer Christina Hennington will move into a strategic adviser role until department Target Sept. 7, the company said.
Target is focusing on customers that are nervous about the economy and high prices, offering 10,000 new items starting at $1 — with the majority under $20.
“I want to be clear,” Target CEO Brian Cornell told reporters on a call Tuesday. “We’re not satisfied with these results, so we’re moving with urgency to navigate through this period of volatility … We’ve got to drive traffic back into our stores or visits to our site and make sure we’re building momentum.”
Target appears to have a lot of work to do. Out of 35 merchandise categories including discretionary and essentials that the discounter tracks, it’s gaining or maintaining market share in only 15, the company said.
Target’s report follows Walmart’s release of strong quarterly sales last week. The nation’s largest retailer warned that the sting of higher prices will hit shoppers in June and July when the back-to-school shopping season goes into high gear. Company executives said that car seats made in China that currently sell for $350 at Walmart will likely cost customers another $100, for example.
Target didn’t offer specifics on tariffs’ impact on prices, but said that it was looking at different ways to absorb their cost.
“We look at competition,” Cornell told reporters. “We make adjustments literally each and every week, so we’re constantly adjusting pricing. Some are going up. Some will be reduced. That’s an ongoing effort that takes place each and every day.”
President Donald Trump’s threatened 145% import taxes on Chinese goods were reduced to 30% in a deal announced May 12, with some of the higher tariffs on pause for 90 days.
American shoppers are already pulling back on spending as they grow uneasy about the economy. Companies including toy manufacturer Mattel, toolmaker Stanley black & Decker and consumer products giant Procter & Gamble have announced higher prices or plans to raise them.
Target is in a more challenging situation than Walmart.
Groceries account for about 60% of Walmart’s U.S. business, according to the Arkansas-based company’s most recent annual report. Target is more reliant on discretionary items like clothing and accessories because less than a quarter of its sales come from food and beverages.
Target has reduced the number of its store-label products sourced from China to 30% now from 60% in 2017. The company is on its way to reducing that number to 25% by the end of next year, the company said. Target is shifting sourcing to Guatemala and Honduras and is looking to sourcing in the U.S., Target said.
Target also faces boycotts over its reversals of some diversity, equity and inclusion efforts.
Target announced in January that it would phase out a handful of DEI initiatives, including a program designed to help black employees build meaningful careers and promote black-owned businesses. Conservative activists and President Donald Trump have sought to dismantle DEI policies in the federal government and schools.
The pastor of a Georgia megachurch who led a nationwide 40-day boycott of Target stores in response called last month for that effort to continue.
The Rev. Jamal Bryant said in April that the Minneapolis-based retailer has not met all of the boycott effort’s demands, which include restoring its commitment to diversity, equity and inclusion principles and pledging money to black-owned banks and businesses.
His comments follow a meeting that Cornell had with the Rev. Al Sharpton, whose civil rights organization has encouraged consumers to avoid U.S. retailers that scaled backed their DEI initiatives.
Target earned $1.04 billion, or $2.27 per share, for the period ended May 3. That compared with $942 million, or $2.03 per share, in the year-ago period.
Target operates nearly 2,000 stores nationwide and employs more than 400,000 people.
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