The Results
Target posted a drop in quarterly sales Wednesday. The company lowered its full-year profit guidance as shoppers hunt for deals.
Target expects adjusted earnings per share between $7 and $8 for the year. That's down from a previous range of $7 to $9. Much of the new range is lower than last year's $8.86.
The company stuck with its holiday guidance. It expects sales to decline by a low single-digit percentage in the fourth quarter.
The Struggles
Target's sales have been roughly stagnant for four years. The company faces stiffer competition and has grown weaker in areas that once set it apart.
That includes eye-catching merchandise, well-organized stores, and friendly customer service. Some customers also boycotted the retailer after it rolled back key diversity, equity and inclusion programs.
Target shares have tumbled about 67% since the company's all-time high in late 2021. The stock is down about 35% this year. It fell more than 3% in premarket trading Wednesday.
The New CEO's Plan
Incoming CEO Michael Fiddelke takes over February 1. He's the current chief operating officer and former CFO. He's replacing longtime CEO Brian Cornell.
Fiddelke declined to say when sales would turn positive again. "We are focused every day on making the right investments and the right decisions to get Target back to growth as quickly as possible," he said.
Target will boost capital spending to $5 billion next year. That's a 25% jump from this year.
The Changes
Target cut 1,800 corporate jobs last month. That's its largest layoff in a decade.
The company is trying to sharpen its merchandise and get back its fashion sense. It sent designers to rodeos and ski lodges for inspiration. It's also tweaked its online fulfillment strategy to free up employees to stock shelves and help customers.
Target is using AI tools to help. Target Trend Brain helps designers identify popular colors and styles. The company also uses synthetic audiences to test how customers might respond before launching products or marketing campaigns.
The ChatGPT Move
Target announced it's launching a shopping experience with OpenAI next week. Customers can shop Target's app within ChatGPT.
Users can buy multiple items in one transaction and shop for groceries. They can choose how to get purchases, like curbside pickup.
Over time, Target shoppers will get personalized recommendations through ChatGPT.
The Bottom Line
Target cut its profit outlook and expects sales to keep declining this holiday season after four years of stagnant growth, with incoming CEO Michael Fiddelke planning to boost spending 25% and launch ChatGPT shopping to try turning things around.