On May 20, 2024, “Low Price” signs hung on the shelves of Target department store in Miami, Florida.
Joe Reddell | Getty Images
TargetThe weak quarterly earnings underscored why the company is slashing prices on thousands of household staples: It’s trying to win over bargain hunters.
Discount stores are not alone.
Target’s first-quarter results released Wednesday not only showed that U.S. consumers are becoming more discerning about spending in the face of nearly three years of persistent inflation that has squeezed budgets. The company’s sales decline also shows that the battle for shoppers’ wallets has intensified as retailers – and even some restaurants – compete to undercut prices.
Walmart It said last week that its grocery “rollbacks” (short-term deals on specific items) grew 45% year-over-year in April. The discount store also launched a new premium grocery brand with most items under $5.
Elsewhere, Aldi earlier this month cut prices on more than 250 items, including chicken, steak, granola bars and frozen blueberries. and even McDonald’s With some diners turning their noses up at fast-food prices, the company will launch a limited-time $5 value meal in late June.
Target took action Monday, saying it had lowered prices on about 1,500 items and planned to cut prices on thousands more this summer. Many of these items are staples like milk, peanut butter, and diapers.
With consumer prices still up more than 3% from last year, price cuts or deals at several major grocery stores and restaurants could ease the pressure at checkout. This may also give the Fed more confidence to cut interest rates. Even so, lost revenue from falling prices may force companies to cut spending elsewhere — possibly labor costs.
On Target’s earnings call Wednesday, analysts asked about the timing and reasons for the price cuts and whether the retailer or its suppliers would be willing to foot the bill. The company declined to disclose details of the split, but Chief Growth Officer Christina Hennington said Target’s suppliers know the company is committed to passing cost savings on to customers to increase traffic.
Some businesses have retained customers even at the same or higher prices: Chipotle and Sweetgreen, for example, have weathered the slowdown in consumption.
Target vs Walmart
Target’s earnings report reveals at least part of the reason it’s joining the race to cut prices. Sales of discretionary items such as clothing were down from the same period last year. But so are sales of high-frequency items like groceries and paper towels.
Some customers may make their purchases at Walmart. Walmart’s website and store transaction volume increased 3.8% in the most recent quarter, and its U.S. e-commerce purchases surged 22%. reported last week.
Walmart finance chief John David Rainey told CNBC that the retail giant is gaining share from higher-income households. He added that due to the fast-food chain’s shocking price tags, some consumers came to its stores to dine.
“Our customers are coming to us more frequently than before, and we have new customers that we haven’t had traditionally,” he said.
On Target’s earnings call, analysts asked tough questions about whether the retailer was losing support among shoppers or was being viewed as overpriced outside of sales events.
CEO Brian Cornell said Target is putting value front and center as it works to return to growth.
“We want to make sure Americans know that Target is a great place to shop and that we provide tremendous value every time you engage, whether in-store or through our digital channels,” he added. The company expects to reverse declining sales.
Hennington said on the earnings call that when Target cuts prices, customers notice and react. For example, she said it noticed it didn’t have low-priced tech accessories that customers wanted, such as charging cables and phone cases.
The items form part of Dealworthy, a new private label brand launched in February, offering Target’s lowest prices on basics like laundry detergent and paper plates.
“When we launch the right price points at Dealworthy, guests notice immediately and that drives unit and traffic acceleration in those categories, and that’s what we do business by business,” she said.
Similar seasonal items will be available soon, she said. Customers can expect to see cheaper pool noodles, floats and coolers after Target “took a closer look at some of the most popular products from last summer’s assortment.”
—CNBC’s Amelia Lucas contributed to this report.
About The Author
