NEW YORK CITY, New York: Target reported its strongest comparable sales growth in four years on May 20, offering early signs that changes introduced by new Chief Executive Officer Michael Fiddelke are drawing shoppers back to stores and online.
Comparable sales, which include stores and digital channels open for at least a year, rose 5.6 percent in the quarter ended May 2. It was the company's largest increase since early 2022, and its first positive comparable sales result after three straight quarters of declines.
Customers spent more across all of Target's major merchandise categories, helping the retailer exceed Wall Street expectations.
Fiddelke, a 20-year company veteran who became CEO in February, said the company is encouraged by the response but remains cautious.
"We're encouraged to see a strong guest response so far," Fiddelke said. "We're maintaining a cautious outlook given the work we know we have in front of us and ongoing uncertainty in the macroeconomic environment."
Despite raising its annual sales forecast, Target's outlook still fell short of first-quarter growth, disappointing investors. Shares fell five percent on May 20.
In March, Fiddelke announced a US$6 billion turnaround plan that includes remodeling stores, improving staffing and training, and strengthening Target's reputation for stylish yet affordable merchandise.
Target said new partnerships, including one with apparel and home goods brand Roller Rabbit, resonated with shoppers.
The retailer has faced challenges for several years, including complaints about poorly maintained stores and supply chain issues. It also faced protests and boycotts after scaling back diversity, equity, and inclusion initiatives.
Fiddelke acknowledged in an interview with The Associated Press that boycotts had affected business, but said traffic gains in the first quarter were broad-based.
Neil Saunders, managing director of GlobalData Retail, said the results marked an important milestone. The results "represent an early win for Michael Fiddelke and his team," Saunders wrote.
Saunders said execution issues, rather than political controversies, were the primary reason for Target's weak sales. "As important as that matter is, and as much as it does have some impact, it has never been the main issue," Saunders wrote.
Target earned $781 million, or $1.71 per share, in the quarter, down from $1.04 billion a year earlier but well above analysts' expectations of $1.47 per share, according to FactSet.
Net sales rose 6.7 percent to $25.44 billion, also topping estimates.
For the full year, Target expects earnings per share near the high end of its previous range of $7.50 to $8.50. It raised its projected net sales growth to four percent, up from two percent, which would bring annual revenue to about $108.97 billion.
