Target said late yesterday that its second quarter sales were $24.8 billion, 4.9 percent lower than the same period a year ago; same-store sales were down 5.4 percent, reflecting comparable store sales declines of 4.3 percent and comparable digital sales declines of 10.5 percent.
However, as CNBC notes, "Even as sales lagged, the retailer’s profits rebounded." Target’s Q2 net income rose to $835 million, from $183 million a year earlier."
The CNBC analysis points bout that "Target, which saw enormous sales gains during the Covid pandemic, has tried to bounce back from about a year of disappointing results. Excess inventory and higher levels of markdowns hit profits last year. Its merchandise mix, which includes many fun and impulse-driven items, has become a liability as consumers focus on needs rather than wants and put discretionary dollars toward vacations and concerts.
"Groceries account for only about 20% of Target’s annual revenue compared with more than half of Walmart’s annual revenue."
Also during the period, as the New York Times writes, "Target faced criticism and calls for boycotts for its displays and products tied to Pride Month, the annual celebration for the L.G.B.T.Q. community."
In an analysts phone call yesterday, CEO Brian Cornell said, "As we navigate an ever-changing operating and social environment, we’re committed to staying close to our guests and their expectations of Target … At the heart of our purpose is our commitment to bring joy to all the families we serve … So we want to make sure Target’s that happy place for all of our guests.”
- KC's View:
"All our guests" is a tricky construct, since it may be impossible to make everybody happy. As the country continues to diversify, retailers are going to have to figure out how to navigate very difficult waters.
I had another thought about the lawsuit against Target that we reported on earlier this week. You may remember that Target is being sued over losses that a conservative legal group says are related to its Pride Month promotions and resulting boycotts. I broke it down this way:
Conservative groups targeted Target over Pride Month promotions similar to those that the retailer had featured for years during Pride Month. Publicity generated by their complaints resulted in calls for boycotts against Target, which may have impacted sales and its stock price. And now, a conservative legal group is suing Target for not having factored into its economic planning boycotts that it did not foresee (because they had not happened before), and that were actually promoted by their ideological brethren.
The more I thought about it, the more absurd this lawsuit seems. The case hinges on these facts, as described by the Washington Post:
"The investor at the center of America First Legal’s lawsuit is Brian Craig, who is described as a Florida resident who spent around $50,000 for 216.450 shares of Target stock in April 2022. A year later the value of his holdings had fallen to $34,839, and then dropped to $28,896 by June 14 — after the backlash against Target had played out — according to the complaint filed on his behalf."
So this guy is disappointed by Target's results over the past year? So, probably, were a lot of people. In fact, I'd bet that there were millions of people disappointed in the results of hundreds of companies. But this fellow Brian Craig, I would argue, didn't do his due diligence - Target had been doing Pride Day promotions for years, and if he didn't factor those activities and possible blowback into his buy decision, that's his fault, not Target's.
More and more retailers may find themselves targeted by these fringe legal groups who are looking to make cultural/political statements driven by their own epistemic closure and
inabilityunwillingness to accept that diversity is good business.
Target and its retail brethren need to play the long game.