Target set to post first quarterly revenue drop in six years as consumers cut spending
By Granth Vanaik
(Reuters) — Target is expected to post its first quarterly drop in revenue in about six years when it reports results on Wednesday, as the big-box retailer reels from a shift in consumer spending away from discretionary goods to services.
In recent months, consumers have been spending more on services such as travel and entertainment, while cutting down on non-essential purchases including clothing and home goods amid high inflation.
«Target is going to suffer more versus the others because they have a much larger consumer discretionary element to their business,» Edward Jones analyst Brian Yarbrough said.
At least 16 analysts have cut their price targets on the retailer since the beginning of June as its merchandise is skewed towards discretionary items such as clothes, electronics and beauty products.
THE CONTEXT
Target in May had warned of dour second-quarter results as inflation forces consumers to shun non-essential goods.
Mastercard (NYSE:MA) and American Express (NYSE:AXP) in their latest quarters also noted a slowdown in purchases of big-ticket items, even as spending on travel and entertainment remained robust.
A recent backlash over Target's Pride collection is also expected to impact its second-quarter sales.
The company, which has been selling Pride-related products for years, said in May it was making «adjustments» to its Pride merchandise, including removing some items from transgender designer Erik Carnell's Abprallen brand, in response to an increase in customer-employee altercations.
«There were some of the more extreme, anti-pride people, who were threatening violence, and so there was concern from some people for, you know, initially to go to the store,» said Telsey Advisory
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