Target Sees Increased Profit and Customer Traffic in Q2 After Reducing Prices

After a stronger-than-expected first half, retail giant Target recently adjusted its annual profit forecast upward. Up from $8.60 to $9.60 per share, the company now predicts 2024 profit to fall between $9.00 and $9.70 per share. Earnings per share in Q2 were $2.57, which is up from $1.80 in the same period last year.

For the second quarter, Target reported a 3% increase in customer visits compared to a nearly 2% decline in the first quarter. While the average order per customer dropped, comparable sales rose 2%, beating analysts’ expectations of 1.15%.

“We see an incredibly resilient consumer in the face of high inflation and some of the other challenges they’ve been facing to manage their household budgets,” said Target CEO Brian Cornell, per Reuters.

Over half of Target’s annual sales come from nonessentials like electronics and toys. Yet, as inflation has eroded the incomes of many American families, consumers have remained focused on low-priced groceries and other basic items.

To help bring customers back, Target lowered prices on over 5,000 products, particularly bread, milk, and pet food, earlier this year. Plus, its new “dealworthy” private-label brand, introduced at the beginning of the year, added 400 new products priced under $10. The company’s already established “Good & Gather” and “Favorite Day” product lines added 125 new food items.

“We feel great about the reaction that we’re seeing from the consumer based on the 5,000 items where we’ve seen price reductions,” Cornell told Yahoo Finance. “It certainly contributed to traffic growth during the quarter — we expect that to continue over the balance of the year.”

To compete with retail rivals Amazon and Walmart, Target launched Target Circle 360. The paid membership program offers free same-day delivery for orders over $35 as well as no-cost shipping for all orders.

While Target performed better than expected, the company did not change its 2024 sales outlook. Comparable sales for the year are expected to increase 0%-2%. However, it cautioned the final figure will likely fall closer to the lower half of that range.