Target Q2 2023 Earnings Recap
This morning Target released 2023 Q2 Earnings which reflected stronger-than-expected profit performance on softer-than-expected sales.
Total Sales fell -5.4% to LY with digital sales declining at -10.5%, driven by a variety of factors, including a decrease in discretionary spend, lower inflation rates, comps over last year’s promotional and clearance activity, and an adverse reaction to the Pride assortment. Continued strength in Beauty, Food & Beverage, and Essentials offset softness in discretionary categories.
Operating Income Margin Rate is up compared to last year at 4.8% (1.2% Q2 2022). This was driven by lower markdown rates, lower freight rates, retail price increases, and an increase in store fulfillment of digital orders. These benefits were partially offset by higher inventory shrink.
Target continues to adapt to business trends and is critical in where they invest their inventory dollars. We see this reflected in their 17% decrease in inventory at the end of Q2, with a 25% reduction in discretionary categories, partially offset by inventory investments in frequency categories.
Momentum is driven by newness and innovation including Stanley tumblers, Threshold relaunch, Taylor Swift exclusive vinyl, and Ulta Beauty. Drive-Up services continue to deliver top satisfaction with guests (and 7% growth), especially with the nationwide rollout of return capabilities, and the continued rollout of Starbucks drive-up. July’s Circle week added over 500K new Circle members.
Given recent sales trends, Target lowered its full-year sales and profit expectations. They now expect comparable sales at a mid-single digit decline for the remainder of the year.
Read more about Target’s Q2 earnings and their long-term focus on growth and profit goals here: