Target Reports Strongest Sales Gain in Years, But Sounds Note of Caution

Target reported its strongest quarterly sales gain in years Wednesday, the first sign that new strategies to attract shoppers are starting to bear fruit, but company executives sounded a note of caution about the challenges still ahead.

Its comparable sales, those from stores and digital channels operating for at least 12 months, rose 5.6% in the three months ended May 2. That is the biggest quarterly increase since early 2022.

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The results are up against a big sales dip in the same quarter last year, but Target also sees shoppers gravitating to some of its refreshed product assortment and customer-service changes, executives said on a call with reporters. New products and store layouts in its baby, toy and health departments led to big sales gains in those categories, Michael Fiddelke, Target’s new chief executive, said.

“As we’ve made changes in categories, we’ve seen the guests respond well to those changes. So that’s early evidence to us that we are on the right path,” Fiddelke said. The company lifted its full-year financial estimates as a result.

Company executives set a cautious tone for the rest of the year, however, noting that results might not be as strong in the current quarter. That same quarter last year got a boost from the release of a new gaming console, they said.

In addition, some shoppers likely spent more freely at the start of this year because of tax refunds, executives said, and the macroeconomic environment remains unpredictable overall.

“While consumers have proven to be resilient so far, sentiment has been declining recently and we’re keeping a close eye on their spending behavior,” Target Chief Financial Officer Jim Lee said on a conference call Wednesday.

The company’s stock had been trading higher premarket, but reversed course during the conference call. Shares were recently down about 4% to $122.04. Some investors noted that Target’s turnaround effort is costly, with net income down nearly 25% in the most recent quarter, so an unclear consumer outlook could become problematic as the year progresses.

“Even with this early progress, we know our work is just beginning,” Fiddelke, the CEO, said on the call. Earlier this week, Target named a new leader of its supply chain and logistics operations, in part to accelerate its efforts, executives said.