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More customers buying across all six of Target’s main sales categories helped deliver better-than-expected sales, the company said. Comparable sales from stores and digital channels that have been in business for at least 12 months rose 5.6 percent in the three months ended May 2. Compared with the decline a year ago, this figure marked the largest increase since the beginning of 2022.
The retail chain also raised its annual revenue outlook, saying it expects the momentum to continue through the rest of the year.
Target CEO Michael Fiddelke, a 20-year company employee who became CEO of the struggling retailer in February, said he remains cautiously optimistic given where the company’s operational overhaul is at.
“We are encouraged to see a strong response from guests so far,” Fiddelke told reporters on Tuesday, adding: “We maintain a cautious outlook given the work we know is ahead of us and the ongoing uncertainty in the macroeconomic environment.”
He and other Target executives pitched to investors in early March a $6 billion plan to reverse three consecutive years of sales declines by remodeling stores, restoring the chain’s reputation for stocking stylish clothing for customers on a budget and improving store staff and worker training.
New collaborations with labels like Roller Rabbit, a clothing and homewares brand known for its whimsical, block-print designs, are resonating with shoppers, company executives said. Fiddelke said the expanded selection of toys costing under $10 has also been popular.
Target is one of the first major retailers to report financial results covering the period from February to April. Analysts will be interested to hear executives’ comments on whether consumers are changing their purchases due to rising gasoline prices fueled by the Iran war.
But the discount chain was struggling long before the war and was losing ground to rival Walmart. Customers complained about cluttered stores lacking the trendy but affordable niche that earned Target its “Tarzhay” nickname.
Fiddelke is making changes in hopes of luring shoppers back. He shuffled the leadership team at Target, increased spending on store staff and made cuts at distribution facilities and regional offices. Target on Tuesday named a former Walmart executive as its new head of supply chain as it tries to fix another problem hurting sales: unreliably stocked store shelves.
The company has also focused on overhauling categories in which it has lost market share, including home goods and apparel. For example, the company said in early March that 75% of its decorative home accessories, including pillows and candles, will be new.
Beyond its stores, Target has also taken a hit to its reputation over the past two years. The company’s decision to roll back its diversity, equity and inclusion initiatives sparked protests and boycotts.
Target became a flashpoint again this year as Minneapolis, where the retailer is headquartered, became the center of a crackdown on immigrants. Local activists have called for the company to take a public stand against the Trump administration’s influx of federal agents into the city, especially after the killing of two residents who participated in the protests.
In early March, Fiddelke acknowledged in an interview with the Associated Press that boycotts were affecting Target’s sales. It said Tuesday that increased store traffic in the first quarter was broad-based across regions and customer types.
Target reported first-quarter earnings of $781 million, or $1.71 per share, for the three months ended May 2. This compares with $1.04 billion, or $2.27 per share, in the same period a year ago.
Adjusted earnings results were $1.71 per share. Net sales increased 6.7 percent to $25.44 billion. Analysts expected $1.47 per share on sales of $24.7 billion, according to FactSet.
Target said it expects full-year earnings per share to be near the high end of guidance it offered in March, between $7.50 and $8.50. Analysts expect $8.12 per share for this year, according to FactSet.
Target said it expects net sales growth to be 4% higher this year than the previous forecast of 2%. This would bring sales to $108.97 billion.
