Target Corporation has lowered its sales guidance for the year by a wide margin after seeing an alarming plunge in its recent sales performance. The outlet continued to struggle with its bottom line, announcing a 5.7% decline in sales during the last three months ending in May. They blamed this drop on a “highly challenging environment” with the imposition of new trade tariffs.
The company had over the summer projected a net sales growth of about 1%. As they started to feel the impact of tariffs, Target was already in a precarious position. The retailer imports approximately 30% of its proprietary-label products from China. With tariffs on imported goods continuing to increase, Target has had to reconsider how it sources its products.
Target is under greater duress after backlash intensified to a fever pitch. This backlash is a direct result of their reckless earlier move to remove diversity, equity and inclusion (DEI) goals. Opposition quickly escalated, mostly by a group of shareholders who filed a class action. Led by City of Riviera Beach Police Pension Fund of Florida, they filed a class action lawsuit against the retailer. The shareholders all claimed that the company had committed fraud. They alleged that the company concealed risks related to its DEI policies, which the company abolished in January.
Given these challenges, Target is leading the charge by proactively stepping up to minimize the effect tariffs will have on its bottom line. The retailer has been in discussions with suppliers and is currently working to broaden its supplier base outside of China. This tactical pivot will help reduce the reliance on offshoring and increase agility to engage in a faster-changing market landscape.
“These efforts are expected to offset the vast majority of the incremental tariff exposure,” said Rick Gomez, Target’s chief commercial officer. This announcement is significant in that it highlights the company’s unwillingness to be swayed by external pressures, instead doubling down on their supply chain restructuring.
In addition to earlier and smaller orders, Target plans to change the timing and size of its orders altogether as part of its new procurement approach. Chief Executive Brian Cornell emphasized that pricing decisions will rely heavily on the company’s ability to source more products domestically and lessen dependence on Chinese suppliers.
As a result, Target’s stock price has plummeted in recent weeks. This decline follows a fierce conservative outcry over LGBTQ+ themed merchandise offered in its stores earlier this year, in addition to other trade headwinds. This confluence of factors has put the retailer in a very vulnerable position as it continues to try to operate through a turbulent market environment.