Target's Q2 results are mixed! Revenue down but net profit up!

Target's Q2 results are mixed! Revenue down but net profit up!

It is learned that on Wednesday (August 16), US retail giant Target reported better-than-expected second-quarter earnings, but its sales fell as consumers cut spending on non-essential items, boycotted Pride Month products and increased retail theft.

“Consumer resistance to Pride merchandise had a significant impact on sales, which slowed sales in May and June,” Target CEO Brian Cornell said on the earnings call. “However, sales rebounded in July.”

During the call, Cornell again highlighted the problem of retail theft and organized retail crime, noting that in the first five months of 2023, thefts involving violence or threats of violence at Target stores increased 120%.

"Second quarter contraction was still in line with our expectations, but well above the level we expect to operate sustainably over the long term. Unfortunately, security incidents related to theft are increasing," Cornell told investors.

It is learned that the reasons for the decline in Target's sales are: food, beverages and household necessities occupy a large part of the wallet of American consumers. In addition, consumers pay more attention to experience consumption.

In the quarter ended July 29, Target's net profit was $835 million, up from $183 million in the same period last year, and earnings per share were $1.80, higher than analysts' expectations of $1.43. The retail giant's revenue fell 4.9% from $26.037 billion to $24.773 billion, lower than analysts' expectations of $25.178 billion.

In the second quarter, Target's comparable sales fell 5.4%, including a 4.4% drop in total sales and a 10.5% drop in digital sales. The company said that continued growth in its "core" businesses (daily necessities, beauty, and food and beverages) partially offset the decline in non-essential categories. The beauty business was particularly strong, achieving double-digit growth. Among them, Ulta Beauty sales in Target stores more than doubled year-on-year.

As of the second quarter, Target's merchandise inventory was down 17% year-over-year, with inventory in the discretionary category down 25%.

Target lowered its full-year guidance due to weak sales. The company expects comparable sales to decline in the mid-single digits in 2023 and adjusted earnings per share of $7.00 to $8.00, down from its previous forecast of $7.75 to $8.75.

Brian Cornell said: "We will continue to take a cautious approach to planning our business. We have adjusted our performance guidance to address the continued challenges facing near-term revenue. However, we believe that our long-term investments in our business and strategy will enable us to achieve sustainable profitable growth in the coming years."

Editor ✎ Nicole/

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