Inflation is biting into Target’s ‘Tar-zhay’ luster

Target, once celebrated for its affordable yet stylish offerings, is grappling with a tarnished image due to persistent inflation. The retailer has experienced a 3.7% drop in year-over-year sales in its most recent quarter, marking the fourth consecutive quarter of declines. This downturn is largely attributed to customers prioritizing essential items over discretionary goods amid rising prices.

In response, Target is adjusting its strategy by reducing prices on over 1,500 essential products and launching a new budget-friendly house brand named Dealworthy. These moves aim to recapture the attention of price-sensitive consumers and compete more effectively with discount retailers and giants like Walmart, which has seen a sales increase of 3.8% in the last quarter.

In the same period, Target's sales at stores open for at least one year dropped 3.7% from a year ago, marking the fourth-straight quarter of sales declines. In contrast, Walmart's sales increased by 3.8% last quarter. The diverging results are evidence of the same trends impacting consumers, with Walmart making up the difference by growing grocery sales more than enough to offset discretionary losses. Digital Commerce 360 analysis shows that while both retailers experienced a decline in e-commerce sales growth, Walmart's online sales growth outperformed Target's in the quarter. Walmart's U.S. online sales grew 24% for the fiscal 2024 second quarter, while Target's digital sales declined 10.5% year over year in the fiscal 2023 second quarter.