Shoppers Flee — and Target Slashes Prices

Meanwhile, TJ Max doesn’t rule out further price increases.

By Eric Gardner, More Perfect Union

Target, the Minneapolis-based retail giant, announced last week that it would cut prices for 5,000 regularly purchased products across its commerce empire. A few days later, management told investors why: high prices drove shoppers to lower-priced retailers. “The sustained level of elevated prices has had a meaningful impact on budgets and savings for many families,” Vice President Christina Hennigton told investors.

For the first quarter of 2024, Target reported total sales of $21.4 billion, a decrease of 3.2 percent since last year. It is the fourth straight quarter of declining sales. Most troubling for the company is that existing stores sold 3.7 percent less. The results were “significantly worse than the overall market, which underlines that Target is losing (market) share,” said Neil Saunders, managing director at investment analytics company GlobalData.

Target is the sixth largest retailer in America by revenue, trailing only Walmart, Amazon, Costco, Kroger, and Home Depot. Earlier this month, its chief rival, Walmart, reported solid results, expanding U.S. sales by 4.6 percent. In its earnings call last week, executives said the company had implemented over 7,000 price decreases in the quarter, which helped it expand sales.

Unlike its Arkansas rival, which captures about 25 percent of American groceries, Target sells groceries while specializing in more discretionary items like clothing and home goods. As rising prices have strained consumer’s wallets, people are cutting down on optional purchases and migrating elsewhere. Target plans to lure shoppers back by lowering prices for food items like bread, milk, and meat while reducing the cost of paper towels and diapers. Circana, a consumer research firm, estimates that the retail price of diapers has increased 35 percent since 2019.

Earlier this week, the Federal Reserve released its annual Economic Well-Being report, which surveys people’s overall financial well-being. Roughly two-thirds of respondents said raising prices were making their financial lives worse, with nearly one in five people responding “much” worse. Overall, 72 percent of adults said they were doing “okay” financially, with inflation being their top financial concern.

The U.S. Bureau of Labor Statistics’ monthly consumer price index (CPI) measures price changes across goods and services. In the most recent reporting period, prices are up 3.4 percent, with gasoline and shelter driving over 70 percent of the increase. Food was effectively flat, primarily led by a 7.3 percent decline in the price of eggs.

Not all major retailers are interested in lowering prices to attract customers. TJX, which owns off-sale retailers TJ Max and HomeGoods, told investors that future price increases are still on the table. “We believe there’s still an opportunity in our pricing as we continue to selectively raise our prices,” CEO Ernie Herrman said on Wednesday’s investor call.

The company, which primarily sells discounted apparel, saw sales increase 6 percent, boosting quarterly revenues to over $12.5 billion. Management expects retailers who compete in commodity items to slash prices to lure consumers back into stores.  “Fortunately, for us,” Herman said. That type of thing hardly happens in “categories that we do business in.”

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