New York (CNN) Shoppers retreat to Target, Home Depot And other major chains are facing pressure from higher prices and borrowing costs.
Target’s total sales rose 0.5% in its latest quarter from the year-earlier quarter, the company said Wednesday. But digital sales fell, and the company told shoppers Preferred purchase withdrawn CEO Brian Cornell called it a “very challenging environment” for consumers.
target (DGT) Sales at stores open at least a year rose 0.7%, and the company said customers were spending more on food and essentials. Profit fell 5.8% in the quarter.
It’s the latest retailer to say shoppers are pulling back on items like clothing and homewares and shifting to groceries and essentials. Low- and middle-income consumers have been hit hard by rising prices.
Neil Saunders, retail analyst at GlobalData, said this affects Target because the chain relies on impulse buys and shoppers fill their carts with items that catch their attention while browsing the stores.
“The carefree shopping trip has been replaced by more focused tasks, where people set budgets and don’t want to deviate from them,” he said in a note to clients.
Theft will increase
Target also warned that losses from shoplifting and organized retail crime will reduce its profits by more than $500 million this year from a year ago.
Retailers in some parts of the country have said shoplifting and organized gangs stealing goods and reselling them online have hurt their businesses. Target and other chains have locked down products to prevent shoplifting.
But Target is one of the few chains to assess its losses, known in the retail industry as “shrinkage.” Shortages also come from employee theft, faulty products, and other errors.
Retail sales will reach $94.5 billion in 2021, up 53% from 2019, according to the National Retail Federation’s annual survey of about 60 retail member companies.
But the impact of store closures on retail losses may have been overstated in some cases.
Walgreens said losses increased during the pandemic and cited organized retail crime in its decision to close five San Francisco stores by 2021. But it recently backtracked.
“Maybe we cried too much last year,” a Walgreens executive said in January.
Shares of Target fell slightly during premarket trading on Wednesday.