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CNN
13 hours ago
- Business
- CNN
Walmart is raising prices because of tariffs. Customers are still flocking to Walmart
Tariffs Retail consumerFacebookTweetLink Follow Walmart is getting hit by tariffs, like every other business in America. But customers are still flocking to Walmart because they believe the retailer offers them the biggest bang for their buck. The retail behemoth once again on Thursday showed how it uses its size to dominate the industry. Its economies of scale help keep prices as low as possible, even as Trump's tariffs raise costs. Walmart also relies on its strength in groceries and necessities to win over shoppers looking for discounts. More than half of Walmart's sales come from groceries. Walmart said Thursday that sales at US stores open for at least a year jumped 4.8%, and it gained market share across income groups, led by growth with upper-income households. The company also raised its sales outlook for the year. CEO Doug McMillon said that tariffs have created pressures for the company and its seeing its 'costs increase each week.' But it's keeping prices down 'for as long as we can.' Customers have not made major shifts to their purchasing behavior because of tariffs, he said, but some middle and lower-income households have stopped buying some discretionary products that have gone up in prices. 'Value is still en vogue. That's the key message from Walmart,' Neil Saunders, an analyst at GlobalData Retail, said in a note to clients. 'Broad consumer and macro trends remain favorable to Walmart.' Still, Walmart's stock fell 3% during pre-market trading. The company missed analysts' profit forecasts. Heading into Thursday, Walmart's stock had increased 36%. Walmart is surging ahead of its rivals, such as Target and Home Depot. Target, in particular, is in a funk and its CEO is stepping down. Target on Wednesday reported sales fell for the third consecutive quarter. Shares tumbled 6%. Target has been one of the worst-performing stocks on the S&P 500. Target CEO Brian Cornell is stepping down after 11 years at the retailer, as the company faces slumping sales and backlash to its retreat on DEI. He will be replaced early next year by Michael Fiddelke, Target's current chief operating officer. Some investors and analysts criticized the move, arguing Target should have hired an outside voice to lead the company. The company's business is falling behind Walmart because it stocks more non-essential goods such as home decor than Walmart. Many shoppers, strained by inflation over the past several years, are buying fewer discretionary products and focusing on essentials. Target also imports about half of its merchandise, compared to roughly 33% at Walmart, so it needs to raise prices at almost double the rate of Walmart to mitigate the tariff impact, Bank of America analyst Robert Ohmes said in a report this week.
Chicago Tribune
21-05-2025
- Business
- Chicago Tribune
Target sales drop in 1st quarter and retailer warns they will slip for all of 2025
NEW YORK — Target's challenge to revive sales and its status as a cheap chic retailer just got more complicated. The discounter announced on Wednesday that sales fell more than expected in the first quarter, and the retailer warned they will slip for all of 2025 year as its customers, worried over the impact of tariffs and the economy, pull back on spending. Target also said customer boycotts did some damage during the latest quarter. The company, long a fierce corporate advocate for the rights of Black and LGBTQ+ people, scaled back many diversity, equity and inclusion initiatives in January after they came under attack by conservative activists and the White House. Target's retreat created another backlash, with more customers angered by the retailer's reduction of LGBTQ+-themed merchandise for Pride Month in June of 2023. Shares fell 3.5% in midday trading Wednesday. Quarterly sales fell 2.8% from last year to $23.85 billion, and that was short of the $24.23 billion Wall Street expected, according to FactSet. Target earned $1.04 billion, or $2.27 per share, for the period ended May 3. That compares with $942 million, or $2.03 per share, in the year-ago period. Target cut its annual sales projections Wednesday. The company now expects a low-single digit decline for 2025 after projecting a 1% increase for sales in March. It also forecast annual per-share earnings of $7 to $9, excluding gains from legal settlements this year. For the year, analysts expect earnings per share of $8.34 on sales of $106.7 billion, on average. Comparable store sales, those from established stores and online channels, fell 3.8%. That includes a 5.7% drop in store sales and a 4.7% increase in online sales. That reverses a comparable store sales increase of 1.5% in the previous quarter. The number of transactions across online and physical stores fell 2.4%, and the average ticket dropped 1.4%. Target said it couldn't reliably estimate the individual impact of each of the factors that were hurting its business. Target is setting up a new office to be led by Chief Operating Officer Michael Fiddelke focused on faster decision-making to help accelerate sales growth. The company said that current Chief Strategy and Growth Officer Christina Hennington is stepping down from her position and will be in a strategic role until Sept. 7. Neil Saunders, managing director of GlobalData Retail, said Hennington had been considered a potential successor to Cornell. 'This is a tacit admission that Target isn't doing a good enough job in some areas, so we welcome it as a potential way to engineer change,' Saunders wrote in a note published Wednesday. 'But we caution that it can only accomplish its goals if the closed and defensive culture at Target changes for the better.' Target is also intensifying efforts to entice customers nervous about the economy. The retailer will offer 10,000 new items starting at $1 — with the majority under $20. 'We're not satisfied with these results, so we're moving with urgency to navigate through this period of volatility,' Target CEO Brian Cornell told reporters on a call Tuesday. 'We've got to drive traffic back into our stores or visits to our site.' Out of 35 merchandise categories that the company tracks, it's gaining or maintaining market share in only 15. The company reported some market share gains in women's swimwear, infant and toddler clothing, and active wear. The latest results underscore Target's ongoing struggle in recent years to revive sales, particularly in nonessentials like fashion and home furnishings, as competition grows more fierce. Back in March, Target had outlined to investors how it was going to bring back its 'Tarzhay' magic— defined by affordable but trendy offerings — by expanding its store label brands and shortening the time it takes to get products to the shelves from conception. That will help the company stay close to trends, company executives said. But it's been a complicated feat even without the tariff trade wars. Target's shares have fallen more than 37% in the past 52 weeks. Target rival Walmart reported strong quarterly sales last week. The nation's largest retailer said it's already raised prices on some items due to tariffs and that more price hikes are on the way this summer when the back-to-school shopping season goes into high gear. For example, car seats made in China that sell for $350 at Walmart will likely cost customers another $100, executives said. Target didn't offer specifics on tariffs' impact on prices, but said that it was looking at different ways to offset those costs like shifting sourcing. It said it should be able to offset the majority of the impacts from tariffs. 'We look at competition,' Cornell told reporters. 'We make adjustments literally each and every week, so we're constantly adjusting pricing. Some are going up. Some will be reduced.' President Donald Trump's threatened 145% import taxes on Chinese goods were reduced to 30% in a deal announced May 12, with some of the higher tariffs on pause for 90 days. Walmart was able to dodge some of the tariff damage other retailers are suffering because groceries account for about 60% of its U.S. business. Target is more reliant on discretionary items like clothing and accessories, with less than a quarter of its sales coming from groceries. The company has reduced the number of its store-label products sourced from China to 30% now from 60% in 2017. The company says is on its way to reducing that to 25% by the end of next year. Target is shifting sourcing to Guatemala and Honduras and is looking to sourcing in the U.S. Target is being pressured on other fronts as well. The company in January said it would phase out a handful of DEI initiatives, including a program designed to help Black employees advance their careers and promote Black-owned businesses. Conservative activists and President Trump have sought to dismantle DEI policies in the federal government, schools, and at private businesses. The pastor of a Georgia megachurch who led a nationwide 40-day boycott of Target stores in response called last month for a continuation of that effort. The Rev. Jamal Bryant is seeking a reinvigorated commitment from Target on diversity, and he wants more support from Target for Black-owned banks and businesses. Target operates nearly 2,000 stores nationwide and employs more than 400,000 people.
CNN
25-02-2025
- Business
- CNN
Home Depot snaps its losing streak
Home Depot is growing again. America's largest home improvement retailer said Tuesday that sales at stores open for at least a year grew 0.8% last quarter, snapping eight straight quarters of sales declines. Home Depot also sounded an upbeat forecast for 2025, saying sales at stores open at least a year would grow by 1%. Home Depot's stock (HD) fell around 2% during pre-market trading Tuesday. It's an encouraging sign for consumer spending on their homes and big-ticket purchases. Home Depot is bellwether of the US housing market and the economy. 'The fact that US comparable sales are back in the black after declining for eight quarters or two years is a very clear win for Home Depot,' said Neil Saunders, an analyst at GlobalData Retail. Home Depot's business is closely tied to the housing market, and high interest rates have put a brake on housing turnover and consumers financing larger projects. In an interview with CNBC, Home Depot finance chief Richard McPhail said 'housing is still frozen by mortgage rates.' But he said Home Depot saw broad growth last quarter, as sales increased in about half of its merchandise categories. Still, Home Depot said it was seeing pressure on large remodeling projects, a sign consumers are strained by higher interest rates. Home Depot's results were a positive sign after Walmart, the nation's largest retailer, warned last week that 2025 would be a rockier year. Walmart said it expected sales to slow down amid concerns about inflation and tariffs. Walmart's warning drove the Dow down about 450 points Thursday, and it has fallen every day since.
