Target said sales dipped in the first quarter of 2024 as customers cut back on discretionary items.
The company said comparable sales were down 3.7% in the quarter, primarily driven by soft home and hardline sales. Target's updated financial disclosure comes just days after the company said it is lowering prices on thousands of items, including many grocery products and household essentials.
Target Executive Vice President Christina Hennington cited numerous reasons consumers are cutting their discretionary spending at Target.
"Consumers remain surprisingly resilient despite a challenging backdrop of significantly elevated prices compared to just a few years ago," she said. "And even as inflation moderates and we see sequential improvement in discretionary category trends, higher interest rates, uncertainty around the future of the economy, continued social and political divisiveness, and the upcoming election cycles have consumers concerned about what lies ahead. In fact, consumer confidence took a meaningful dip in April despite a strong job market and normalizing inflation."
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Last week, Walmart Chief Financial Officer John David Rainey noted similar challenges.
"Many consumer pocketbooks are still stretched, and we see the effect of that in our business mix as they're spending more of their paychecks on non-discretionary categories and less on general merchandise," he said. "This merchandise mix remains a headwind to margins, but it's consistent with our expectations."
Hennington also noted that more consumers have maxed out their credit cards recently. Last week, the Federal Reserve Bank of New York released new data indicating that the share of maxed-out borrowers is back to pre-pandemic levels. The data revealed that borrowers who have maxed out their credit cards are far more likely to be delinquent with payments than others.
Recent data has also shown that credit card debt is quickly rising after dipping during the pandemic, as many Americans were able to catch up on payments with the help of economic stimulus checks.
These headwinds come despite the unemployment rate remaining below 4% for the last two years and wages outpacing inflation in the last year, according to the Bureau of Labor Statistics.