Target’s Q1 revenue exceeded expectations! But it warns that retail theft will heavily impact profits
Q1 revenue for Target exceeded expectations, but profits will be heavily impacted by retail theft
According to foreign media reports, Target announced its financial performance for the first quarter of 2023 on May 17th. Despite consumers reducing purchases of non-essential items and more in-store shoppers than online shoppers, Target’s profits and sales exceeded expectations.
Looking ahead, Target CEO Brian Cornell stated that net profits are expected to decrease by more than $500 million compared to last year.
He said, “The losses caused by in-store theft and organized retail crime are important driving factors for the decline in net profit. We are making significant strategic investments to prevent this situation from continuing to occur in our stores while better protecting our customers and teams.”
BusinessDialogue understands that Target is working to reduce in-store theft and organized retail crime by installing security devices in stores and adjusting product categories.
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The financial report shows that in the first quarter ending on April 29th, Target’s net income decreased from $1.01 billion in the same period last year to $950 million. Adjusted earnings per share decreased from $2.19 to $2.05, but exceeded analysts’ expectations of $1.77.
The company’s total revenue increased by 0.6% year-on-year to $25.32 billion, higher than the expected $25.26 billion. Thanks to a 0.9% increase in in-store traffic, same-store sales in the first quarter increased by 0.7%, also exceeding expectations.
However, Target’s comparable digital sales decreased by 3.4% compared to the same period last year. With the promotion of the “drive-up return” service, Target’s same-day order volume increased by a mid-single digit percentage.
The company stated that sales growth in essential items such as beauty, food, and beverages (high single-digit growth) offset the continued weakness in categories such as clothing, home goods, and other non-essential items (double-digit sales decline).
In the first quarter, sales costs decreased by 0.4% to $18.39 billion, but gross margin increased from 26.7% to 27.4%. In addition, as of the end of the first quarter, Target’s inventory decreased by 16% compared to the same period last year (driven by a significant 25% reduction in non-essential categories).
Target pointed out that, given the weak sales trend in the first quarter, sales are expected to continue to be sluggish in the second quarter. Same-store sales in the second quarter will show a low single-digit decline, with adjusted earnings per share expected to be between $1.30 and $1.70, lower than the previous expectation of $1.95.
The retailer also reiterated its full-year performance guidance, expecting same-store sales to increase by 0.7% and adjusted earnings per share to be between $7.75 and $8.75.
BusinessDialogue learned that in the first quarter, Target opened six new stores (with a target of opening 20 new stores this year) and began comprehensive renovations and upgrades on more than half of its existing stores (a total of 175 stores).
Editor ✎ Nicole/AMZ123
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