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MINNEAPOLIS – Target Corp. today said sales increased in its first quarter but higher costs impinged on profits.
Comparable sales increased 3.3% in the quarter, reflecting traffic growth of 3.9%, the company said. Store comps were up 3.4% while digital comps increased 3.2%.
Sales growth was led by frequently purchased categories, including food and beverage, beauty, and household essentials.
First-quarter revenue totaled $25.1 billion.
Target’s operating margin rate of 5.3% was below expectations, with gross margin pressure reflecting actions to reduce excess inventory and cope with higher costs.
“Our first-quarter results mark Target’s 20th-consecutive quarter of sales growth,” Brian Cornell, Target’s chairman and chief executive officer, said in a statement. “Throughout the quarter, we faced unexpectedly high costs, driven by a number of factors, resulting in profitability that came in well below our expectations, and well below where we expect to operate over time. Despite these near-term challenges, our team remains passionately dedicated to our guests and serving their needs, giving us continued confidence in our long-term financial algorithm, which anticipates mid-single digit revenue growth, and an operating margin rate of 8 percent or higher over time.”
Target reiterated its revenue forecast, which calls for mid-single-digit growth this year and beyond.
As usual, more than 95% of sales in the quarter were fulfilled by its stores, the company said. Same-day services (Order Pickup, Drive Up and Shipt) increased 8%, led by Drive Up, which grew in the mid-teens on top of more than 120% last year.
Target’s first quarter was similar to that of rival Walmart, which posted its financial results on Monday. Both big-box retailers missed on projected earnings, and both cited inflationary pressures in the economy.
