Target experienced a sales downturn in the second quarter amid ongoing consumer backlash from the retailer’s Pride and transgender merchandise.
Comparable sales slipped 5.4% while the $24.8 billion in total revenue was 4.9% lower than last year.
Negative reaction to Target’s Pride collection had a material impact on sales, Target CEO Brian Cornell said on a call with reporters.
“As we navigate an ever-changing operating and social environment, we are applying what we learned” he added.
Last month, Target confirmed “adjustments” to the Pride merchandising plans were underway after Fox News Digital learned it rolled back displays at some of its locations. Backlash to merchandise, including “tuck friendly” swimsuits, forced the company to move items from the front of their locations.
Following the rollout, Target’s market value has fallen to $57. 7 billion from $74 billion.
After Target removed some items in June, Cornell said it “saw things normalize,” but the retailer will continue to have a collection for Pride month and other heritage months.
Target now expects annual comparable sales to decline in the mid-single digit range compared to its prior forecast of low-single digit decline to a low-single digit increase.
The retailer also said it expects 2023 adjusted profit per share between $7 to $8, compared with the prior range of $7.75 to $8.75.
Target, which largely sells non-essential items like electronics and home decor, has been trying to balance its merchandise by adding more daily-use products as consumers limit their spending to necessary items amid rising prices.
Inventory fell 17% in the second quarter, with a 25% drop in discretionary items in its stock, Target said.
“We are seeing food and beverage and household essentials absorbing a larger portion of the US consumers wallet,” Cornell said.
“Guests are out at concerts, they are going to movies, they are enjoying those experiential moments and are shopping very carefully for discretionary goods,” he added.
On an adjusted basis, Target earned $1.80 per share in the quarter ended July 29, beating expectations of $1.39.
“The shares are likely reacting to the earnings upside on from stronger operating margins despite the sales downside and the full-year guidance cut,” Global Director of Research at M Science John Tomlinson told FOX Business.
“Also, the company mentioned that sales trends have improved since June and that it’s back-to-school season has started off well,” he finished.
The company’s retail rival Walmart will report earnings on Thursday.
Fox News’ Brian Flood and Reuters contributed to this report.