(CTN News) – As a result of higher interest rates and higher prices, customers at Target, Home Depot, and other major chains are pulling back on their purchases.
There was a 0.5% increase in Target’s total sales during the company’s last quarter compared with the same period a year ago, the retailer reported Wednesday. Consumers pulled back on discretionary purchases despite a drop in digital sales, which CEO Brian Cornell described as a “very challenging environment” for consumers.
Target (TGT) reported that sales at stores open for at least one year increased 0.7% and that customers were spending more money on food and essentials than ever before. There was a 5.8% decline in profit in the first quarter of 2019.
Despite the recent pullback in consumer spending on clothes and home goods, it’s the latest retailer to report that the focus has shifted to groceries and necessities instead. In recent years, the rise in prices has been particularly painful for consumers with lower incomes and middle-class families.
GlobalData’s Neil Saunders, a retail analyst, said Target was suffering because it relies heavily on impulse purchases from its customers, who load their shopping carts with items that catch their eye as they browse.
Rather than the carefree shopping trips, he said in a note to clients in which he also mentioned that people have become accustomed to setting budgets and are less likely to deviate from them.
In recent years, there has been an increase in theft
As a result of shoplifting and organized retail crime losses, Target warned that its profitability will decrease by more than $500 million this year as compared to last year as a result of the losses.
Several retail establishments across the country have reported that petty shoplifting, as well as organized groups that steal merchandise and resell it online, have contributed to the decline of their businesses. As a way to prevent shoplifting, Target and other chains have locked up their products.
In contrast, Target is one of the very few chains to provide an estimate of its losses, well known in retail as “shrink.” Shrink can also be attributed to employee theft, misscanned products, or other factors.
An annual survey of around 60 retail companies by the National Retail Federation found that shrinkage in the retail industry surpassed $94.5 billion in 2021, representing a 53% increase over 2019.
In some cases, however, it could be argued that the impact of shoplifting on retail losses may have been overstated.
In a statement, Walgreens said it experienced a spike in losses during the pandemic and cited organized retail crime as one of the reasons for closing five San Francisco stores by the end of 2021. However, it has recently backtracked on that decision.