Target sales drop for the first time since 2016

Target, for the first time in seven years, reported a decline in annual sales—hinting at economic headwinds in the coming year.

Sales dropped 3.7% last year at its stores that have only been open for a year or more. The retail giant projects a modest growth of up to 2% for the current year.

It faced declining revenue, especially in nonfood categories like home goods and electronics, in 2023.

Why?
The company has seen slowed growth in business since 2020 and 2021 when shoppers stocked up during the height of the pandemic.

Target’s core audience is middle-class customers, who are feeling the strain of increased prices over the past year.

Since its peak in 2021, the Minneapolis retailer’s stock had dropped 43%, heading into Tuesday, partly due to its merchandise mix and pricing compared to competitors like Walmart and Amazon.

Despite the sales downturn, Target exceeded Wall Street’s holiday season expectations, causing its stock to surge by over 8% in premarket trading yesterday.

Plans for revival
Target recently announced plans to open over 300 new stores and revamp most of its existing locations over the next decade, aiming to boost annual sales by $15 billion.

Nearly 2,000 stores will undergo remodeling, with a focus on enhancing customer experience through expanded food sections and the launch of Target Circle 360, a membership program offering benefits like free same-day delivery and two-day shipping for orders over $35.

Following Target’s lead, Walmart shifts its focus from e-commerce to physical store expansion, planning to open 150 new Supercenters and smaller neighborhood markets while renovating existing stores.

Macy’s also follows suit, announcing plans for new luxury Bloomingdale’s and Bluemercury locations while closing 150 underperforming stores.