The right wing backlash against its Pride offerings clearly didn’t help Target in its latest quarter, but more alarming for the company must be a 5.4% fall in sales, including a 10.5% drop online.
It’s the first time in six years that sales have gone down at the retailer that’s long been regarded as one of the omni-channel leaders in the sector. Target’s revenue for the quarter to July 29 was $24.8 billion, 4.9% lower than the comparable period last year.
For CEO Brian Cornell, it was another quarter of having to lay out a smorgasbord of excuses for the weaker than expected performance, including the right wing pile-on against its supposed ‘woke’ support for Pride Month:
Many of our store team members faced a negative guest reaction to our Pride assortment. As you know, we have featured a Pride assortment for more than a decade. However, after the launch of the assortment this year, members of our team began experiencing threats and aggressive actions that affected their sense of safety and well-being while at work. I want to make it clear, we denounce violence and hate of all kinds.
Beyond that manufactured controversy, the firm is inevitably exposed to wider macro-economic pressures:
The divergence of sales trends between our frequency and discretionary categories is being driven by multiple cross currents that are affecting the US consumer. These include the impact of inflation in frequency categories, like Food & Beverage and Essentials causing these categories to absorb a much higher portion of consumers’ budgets.
In addition, consumers are choosing to increase spending on services like leisure travel, entertainment and food away from home, putting near-term pressure on discretionary products. And finally, the rollback of government efforts to support consumers during the pandemic including stimulus payments, enhanced childcare tax credits and the suspension of student loan payments, presents an ongoing headwind that consumers continue to manage.
But there are still successes to be marked, according to Chief Growth Officer Christina Hennington, who also flagged up changes ahead to the retailer’s digital strategy:
Just like we re-model our stores to reflect our latest thinking and guest feedback into the shopping experience, we will begin rolling out a remodel of our digital experience this quarter. Based on guest feedback, we’re investing to create a digital experience that enhances the love of discovery while balancing the ease of navigation. This will include different landing experiences, more personalized content, enhanced search functionality, ease of navigation and other updates to bring more joy and convenience to our digital guests.
Across channels, sales were strongest in stores, while results in the digital channel were led by continued growth in the firm’s Drive-Up service. That in turn has been enhanced, said Hennington:
When our guests who already love our Drive-Up service told us that they wanted us to add Starbucks and the ability to make returns, we quickly built, piloted and are now rolling out those capabilities across the chain, and we’re seeing incredibly high Net Promoter Scores from our guests.
Chief Operating Officer John Mulligan said Drive-Up still receives the highest satisfaction rating of any service Target provides:
As proud as we are of what we’ve already accomplished, we continually push ourselves to find new ways to further differentiate Drive-Up. And when we asked our guests how we could do that, they told us that adding Starbucks and taking returns were at the top of their list.
To ensure that we could consistently execute on these new services while maintaining the high bar we’ve attained for satisfaction, we applied a disciplined test and iterate approach to the rollout, beginning with small-scale tests in the second half of 2022. Following a successful test of Drive-Up returns, we launched the service nationwide in April and May, and the results have been outstanding.
Once a guest arrives at a Drive-Up lane, the average wait time for a team member to process their return is within three minutes, consistent with our standards for a traditional Drive-Up order. As we began testing the addition of Starbucks to Drive-Up and given the complexities of making and promptly delivering a hotter cold beverage after a guest arrives, we wanted to put the process through an intensive period of testing and refinement.
And today, based on what we’ve learned during the test period, we’re confident we can scale up this service while consistently maintaining our service standards. As a result, we’re currently in the process of rolling out Starbucks at Drive-Up nationwide and plan to complete the rollout by the end of October, just in time for Pumpkin Spice Latte season.
Retail is an ongoing journey – the continuous process of listening to consumers and rapidly evolving to meet their preferences.
Cornell’s closing remarks make perfect sense. In the past, Target has been able not only to react to customers desires, but also to anticipate them and put the necessary assets in place to meet them. That’s what now needs to be done again.
On one last note, it’s good to hear that Target does not intend to bend to the bigotry of the so-called ‘conservative consumers’ around Pride as Cornell stated:
Pride is one of many heritage moments that are important to our guests and our team, and we’ll continue to support these moments in the future. They are just one part of our commitment to support a diverse team, which helps us serve a diverse set of guests…Our goal is to ensure we continue to celebrate moments that are special to our guests while acknowledging that every day for millions of people, they want Target to serve as a refuge in their daily lives.