Target's 2024 was tough. The stock price fell, struggled to bring about consistent sales growth, faced litigation related to its diversity, equity and inclusive practices, and sought boycotts when it abandoned them.
On Tuesday, retailers tried to provide Wall Street with optimism in the coming years. This predicted a “conservative” increase in comparable sales and its operating profit margin. But even that muted outlook was warned of slightly lower sales and uncertainty about tariffs and consumer confidence in February.
The company reported a solid holiday season, with fourth quarter sales rising 1.5% from the previous year, bolstered by apparel, toys, beauty products and sports goods. E-commerce sales rose 8.7% in the quarter that ended February 1, with a combined in-store and online traffic rising 2.1%.
“Our team increased traffic and achieved better sales and profitability in the largest quarter of the year,” Target CEO Brian Cornell said in a statement.
Target said its full-year equivalent sales increased 0.1%. In contrast, Walmart reported an increase of 4.4% that year.
The results were curtailed, but the rise in sales was the welcome news of Target, which has been trying to get back customers who have pulled back discretionary purchases due to inflation.
However, retailers said the macroeconomic power, including tariffs, could lead to customers being able to curb spending.
President Trump ordered sweeping fees in Canada, Mexico and China. These tariffs, which came into effect Tuesday, charge the US at a 25% rate on all Mexican and Canadian imports, with an additional 10% on Chinese products, in addition to the 10% last month. It can affect common merchandisers like targets.
““We are pleased to announce that we are a company that has been working to help people understand the importance of our efforts,” said Steven Shemesh, equity research analyst at RBC Capital Markets. “It could increase inflation, and that certainly won't help the situation.”
After a positive sales quarter over the summer, the company reported an unexpected recession in November, with a shocked Wall Street down 21% on target's stock. Prices have fallen 52% since their peak in November 2021 through the market closures on Monday. The company's shares jumped 3.9% on Tuesday after its earnings report was released.
Decreasing sales performance is just one of many challenges targets have faced in recent months. In a lawsuit filed last month, the Florida State Board of Trustees, the agency that oversees the state's civil servant retirement fund, denounced the targets and their board of directors for deceiving shareholders for the risks of the 2023 Pride Month Campaign. Some shoppers responded angrily to a campaign that included LGBTQ-themed apparel for children.
Target responded by moving displays behind several southern state stores. The lawsuit seeking class action status alleges that customer backlash has wiped out billions of dollars from retailers' market value.
Then, in January, the company withdrew DEI practices. This is part of a greater drawback to inter-company diversity policies. Customers quickly denounced the target decision, noting that retailers have long been seen as a friendly environment by many minority communities who have sold and emphasized their products. Several groups have urged shoppers to boycott policy changes targeted.
Target's fourth quarter ended before the boycott proceeded. The company said it had a “slight decline in net sales in February,” but in a statement from its chief financial officer, the slowdown was attributed to “non-characteristically cold weather across the US” that affected clothing sales.
At the company's annual investors meeting later Tuesday in New York City, analysts are hoping to hear more about Target's overall strategy.
“They need to talk about the value of their target,” said Kimberly Lee Minor, women's chief executive at the consulting firm Color Retail Alliance. “I think they need to do a real brand audit so the streets can understand how the streets deal with the gaps.”
