Target Saw 120% Increase in Theft in First Five Months of 2023, But Profits Surge

Target's second-quarter results blew past analysts' expectations Wednesday, even as sales missed, with the company reporting earnings per share on an adjusted basis of $3.86, higher than the $1.41 Wall Street expected, according to figures compiled by Morningstar. 

The company's share price rose 3% in early afternoon trading.

Sales at the Minnesota-based company dipped 4.9% to $24.8 billion in the three months ending July 29, compared with $25.7 billion during the same period last year, the company said in its fiscal second-quarter report. The company said inflation, consumer spending more on services than goods and the withdrawal of Covid-related government support all affected sales.

So did the significant backlash from its Pride Month collection, which resulted in a $9 billion drop in Target's market value.

During the company's earnings call Wednesday, CEO Brian Cornell said Target has featured a Pride collection every year for the last decade, but pulled this year's after "members of our team began experiencing threats and aggressive actions that affected their sense of safety and well being while at work."

Rampant retail theft has also affected the company's sales. Cornell told analysts during the company’s earnings call that Target stores "saw a 120% increase in retail theft incidents" in the first five months of this year, some of which involved "violence or threats of violence."

"The company continues to work with community partners to find solutions" for its employees and guests, he added.

Still, Target's profits made a strong comeback, earning $835 million in net income, a substantial jump from the $183 million it made during the same period last year.  

During the company’s earnings call, CFO Michael Fiddelke said it was hard to pinpoint exactly why Target's sales fell. But it could be because consumers are buying fewer clothes and home decorations and spending more money on necessities like food, energy, and rent. 

Consumers appear to be shifting their spending towards items such as books and vinyl records, rather than clothes and home decorations, Christina Hennington, Target's executive vice president and chief growth officer, told analysts during the company’s earnings call. There are “pockets of newness that are working quite well," she added.

The company’s entertainment segment saw "healthy growth in the mid-single digits," particularly in books and vinyl records, she said, helped in part by movies like Barbie and The Little Mermaid, both of which have earned $1.1 billion and $567 million, respectively.