Target Own Brands Grow As Consumer Spending Shifts
Target reported a modest increase in sales for the third quarter as consumers focused their spending on several key segments including beauty, food and beverage, and household essentials, while delaying purchases of products in what the retailer called discretionary categories.
During an investor conference call to review its third quarter performance, Christina Hennington, executive vice president and chief growth officer with Target, noted that higher-prices seen across the store are leading consumers to alter their shopping habits. This includes a shift toward private label products, purchasing more items on promotion and buying products in various pack sizes.
“Our own brands are outperforming their national brand counterparts, growing by double digits,” she said. “Our unique industry-leading in-house design capacity allows us to provide great quality products at tremendous prices.”
Additionally, as consumers look to save money their focus is not solely on price but on products that offer value, she said. Some shoppers are holding out for promotions, while some are opting to buy products in smaller sizes and others are seeing the benefits of purchasing larger packs sizes when those items are offered on promotion.
Total revenue for the three months ended October 29 was $26.1 billion, an increase of 3.3% from the comparable quarter the previous year. Comparable sales growth was driven by 1.4% traffic growth and a 1.3% increase in average ticket. Net earnings were $712 million, a decrease of 52.1% from the third quarter of 2021.
“This performance demonstrates the durability of our business model, which continues to serve our guests and drive loyalty despite the challenging economic environment,” said Brian Cornell, chairman and chief executive officer of Target Corporation. “In the latter weeks of the quarter, sales and profit trends softened meaningfully, with guests’ shopping behavior increasingly impacted by inflation, rising interest rates and economic uncertainty. This resulted in a third quarter profit performance well below our expectations.”
Target also said it is launching an enterprise-wide effort to simplify and gain efficiencies across its business with a focus on reducing complexities and lowering costs while continuing to support our team. While offering few details, the company said this initiative will have an estimated cumulative savings opportunity of $2 billion to $3 billion over the next three years. This will support Target’s investment in driving deeper guest engagement and long-term growth while also delivering on its profit goals.