NEW YORK — Target reported a decline in quarterly sales on Wednesday as higher prices reduced consumer spending.
The Minneapolis retailer also posted earnings results that were below analyst expectations and gave a muted profit outlook, but expects to return to quarter-over-quarter sales growth this quarter.
Shares fell nearly 8% in premarket trading on Wednesday.
The company is looking for ways to reverse declining sales. On Monday it said it would cut prices on thousands of consumer staples in the coming months, from diapers to milk, in a bid to lure customers looking for deals.
And it's also trying to make shopping at Target more convenient and enjoyable to better compete with Walmart and Amazon.com.
Target announced a new paid membership program in April called Target Circle 360, which comes with unlimited free same-day delivery on orders over $35 and free two-day shipping on all orders. The $99 annual membership is well received, the company says.
The company is modernizing existing locations, building more than 300 new stores over the next decade and also broadening its own brand offering for more price-conscious customer choices.
Target reported net income of $942 million, or $2.03 per share, which is 3 cents short of analyst expectations, according to a FactSet survey. Profit for the period ended May 4 was also below last year's $950 million, or $2.05 per share.
Revenue fell 3.1% to $24.53 billion, slightly better than the $24.52 billion Wall Street expected.
Comparable turnover – that of stores or digital channels that have been active for at least twelve months – fell by 3.7%. That was a smaller decline compared to the 4.4% decline in the fourth quarter.
The sales declines occurred primarily in discretionary categories and were partially offset by continued growth in beauty products, the company said. But Target said that while apparel sales were still down, they were improving.
For the second quarter, Target expects comparable sales to increase unchanged by up to 2%. It expects to earn between $1.95 and $2.35 per share. Analysts expect $2.20 per share.
For the full year, Target continues to expect comparable sales to rise no more than 2%. Earnings per share should be between $8.60 and $9.60. Analysts expect $9.49, according to FactSet.
