Target's Q1 revenue beats expectations, but warns that "retail theft will hit profits hard"

It is learned that according to foreign media reports, on May 17, Target announced its financial results for the first quarter of 2023. Although consumers reduced their purchases of non-essential items and there were more in-store shoppers than online shoppers, Target's profits and sales still exceeded expectations.

Looking ahead, Target CEO Brian Cornell said he expects net income this year to be more than $500 million lower than last year.

"Shoplifting and losses from organised retail crime were significant drivers of the decline in net profit," he said. "We are making significant strategic investments to prevent this from continuing to happen in our stores, while better protecting our customers and teams."

Target is working to reduce shoplifting and organized retail crime by adding security features in its stores and adjusting its product assortment, the company said.

Target's net income fell to $950 million in the first quarter ended April 29 from $1.01 billion a year earlier, according to the company's financial report. Adjusted earnings per share fell to $2.05 from $2.19, but exceeded analysts' expectations of $1.77.

The company's total revenue increased 0.6% year-over-year to $25.32 billion, beating expectations of $25.26 billion. Same-store sales rose 0.7% in the first quarter, also beating expectations, thanks to a 0.9% increase in in-store traffic.

However, Target's comparable digital sales fell 3.4% from the same period last year. Target's same-day delivery orders increased by mid-single digits, driven by its "drive-through returns" service.

The company said sales growth in essentials such as beauty, food and beverages (high single-digit growth) offset continued weakness in apparel, home furnishings and other discretionary categories (double-digit sales declines).

Cost of sales fell 0.4% to $18.39 billion in the first quarter, but gross margin improved from 26.7% to 27.4%. In addition, Target's inventory was down 16% at the end of the first quarter compared to the same period last year (driven by a sharp 25% reduction in discretionary categories).

Target said it expects second-quarter sales to remain subdued given the weak sales trends in the first quarter. Same-store sales are expected to decline in the low single digits in the second quarter, and adjusted earnings per share are expected to be between $1.30 and $1.70, down from the previous forecast of $1.95.

The retailer also reiterated its full-year guidance, predicting full-year same-store sales growth of 0.7% and adjusted earnings per share of between $7.75 and $8.75.

It is learned that in the first quarter, Target opened 6 new stores (with a goal of opening 20 new stores this year) and began to fully renovate and upgrade more than half of its existing stores (a total of 175).

Editor ✎ Nicole/

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