Target Predicts Over $1 Billion in Losses From Theft, Forecasts Gloomy 2nd Quarter as Consumers Pull Back

People shop at a Target store in Chicago, Ill., on Nov. 25, 2022. Jim Vondruska/Reuters

Target predicted a gloomy second-quarter forecast as consumers pull back from non-essential purchases such as electronics and home goods, due to inflation.

However, the retailer maintained its full-year profit expectations as total sales rose 0.5 percent, in its May 17 quarterly earnings report.

The company’s poor forecast follows poor numbers from Home Depot, which is predicting a worse-than-expected drop in annual profit.

“American consumers continue to face difficult trade-off decisions as they juggle the wants and needs of their families ... The fear of a looming recession weighs heavily on many American families,” Christina Hennington, a senior Target executive, told investors on the post-earnings call.

Retail sales edged slightly upward in April despite higher prices, but cost-conscious consumers have been selective with their spending, which has indirectly hit large store chains like Target and Home Depot, which mainly sell non-discretionary items.

The Minneapolis-based company is also dealing with rising costs, including a surge in rising theft as a major factor and a dip in overall consumer spending.

The change in consumer habits is beginning to outweigh growth seen in day-to-day earnings, said Target CFO Michael Fiddelke.

Target Faces Losses Due to Struggling Consumers

“We came into 2023 clear-eyed about what consumers were facing with persistent inflation and rising interest rates,” Target CEO Brian Cornell said on a May 16 media call.

“These continued signs of caution among consumers have reinforced why we entered this year with a conservative inventory position,” Cornell said.

First-quarter comparable store sales grew by 0.7 percent, which was led by a 0.9 percent boost in-store traffic, on top of 3.9 percent for the same period in 2022.

On the other hand, online sales posted a 3.4 percent drop.

Target projected adjusted profit between $1.30 and $1.70 per share for the current quarter, below estimates of $1.95, according to FactSet.

The company is maintaining its prior guidance of $7.75 per share to $8.75 per share for the full year.

Analysts are also expecting $8.36 per share, said FactSet.

Target is also benefiting from steady demand for beauty and personal care products, as well as its private-label brands.

Store inventory at the end of the first quarter was 16 percent less than 2022, reflecting a more than 25 percent reduction in discretionary items, which was partially offset by inventory and strategic investments that led to an increase in growth margins.

Surge in Store Theft Becoming a Major Source of Losses

Cornell called the threat of shoplifting and organized crime “increasingly urgent” and warned that it could reduce this year’s profitability by $500 million more than the previous year when losses from theft were estimated to be anywhere from $700 million to $800 million.

Total losses could top $1.2 billion this year and the retailer said it has seen an increasing number of violent incidents as well, but is trying to avoid closing stores and is expanding security, while locking up vulnerable items.

Retailers in major cities are being hit with a theft crime spree due to progressive soft-on-crime laws and left-wing activist law enforcement officials.

Many stores have been closing over the past few years and pulling out of metropolitan regions because of massive losses caused by store robberies, with many led by organized gangs.

Walmart is expected to release its earnings on May 18, while Macy’s, Kohl’s, and Nordstrom will post their quarterly results later this month.

Target said it is continuing to make investments in stores and online to offset its competition.

It announced in early March that it would invest as much as $5 billion this year into expanding services for customers, such as a drive-up service for returns, renovations at 175 stores, and improvements in online shopping.

Target Faces Calls for Boycott

Meanwhile, Target’s new clothing line for Gay Pride Month in June has provoked outrage on social media, with many calling for the retailer to receive “the Bud Light treatment.”

The beer brand has been facing a nationwide boycott since April 1, after it sent a commemorative can to transgender Dylan Mulvaney to celebrate the activist’s first year of identifying as a woman.

Industry data showed that sales of Bud Light declined more than 17 percent in the past month, with $6 billion in profit being lost.

A video of Target’s new children’s clothing line, which was posted on May 17, received more than 1.3 million views as of May 17.

The ad shows a T-shirt with the slogan “trans people will always exist” and another depicting a woman lying down with the caption “busy thinking about girls” and a babygrow suit with the words “bien proud” in the colors of the gay pride flag.

The retailer is also selling a rainbow neck pillow, multi-colored fairy lights, as well as a trans flags.

Gays Against Groomers, an “organization of gays against the sexualization, indoctrination and medicalization of children,” posted: “They are indoctrinating and grooming [children] with LGBTQ ideology. It is highly inappropriate and disturbing.”

Reuters and the Associated Press contributed to this report.