Target has reported lower sales for the first quarter, which shows that the retailer still remains on the back foot, according to an analyst.
The company’s net sales for the quarter ended May 3 fell 2.8 per cent to $23.8 billion, with comparable sales down 3.8 per cent.
CEO Brian Cornell said sales performance was below expectations, citing a highly challenging environment.
According to GlobalData MD Neil Saunders, the poor results show that the retailer is “firmly on the back foot”.
“This is a stark contrast from the Target of a few years back which had a clear sense of purpose and direction.
“…We attribute a lot of it to a management team that has stopped listening, has become far too defensive, and increasingly lacks the courage to make the right moves,” he continued.
While digital sales increased 4.7 per cent, the growth was achieved at the expense of adequate resourcing, which has caused a deterioration in store standards and customer service, the analyst said.
This, in turn, reduces spend and drives customers away, as can be seen in the 5.7 per cent decline in store comparable sales, he added.
The other long-standing problem, according to Saunders, is that Target’s inventory systems are poor. The increased online demand from stores is causing out of stocks and gaps on shelves, which can discourage customers from visiting and pushes them to rivals, he elaborated.
The analyst added that these core issues are exacerbated by a lack of newness in the range, especially in own brand areas.
“Other decisions, like locking up products and putting more restrictions around self-checkout all contribute to a worsening experience and increase friction – which is what Target should not be doing at a time when customers are focused on getting value for both their money and their time,” he said.
For the full year, Target now expects a low-single digit decline in sales. Saunders said the outlook suggests another soft year and that Target enters it in a relatively weak position.
The company has established a multi-year Enterprise Acceleration Office to help deliver faster progress on its roadmap for growth. COO Michael Fiddelke will oversee this effort, with key priorities ranging from simplifying cross-company processes to using technology and data in new ways to power the team.
Christina Hennington, chief strategy and growth officer, will depart Target and move into a strategic advisor role through September 7. CFO Jim Lee will take on the leadership of enterprise strategy and partnerships.
In early March, the company outlined a five-year growth strategy to drive over $15 billion in sales growth by 2030.
