Target Corp is expected to post its first quarterly drop in revenue in about six years when it reports results as the big-box retailer reels from a shift in consumer spending away from discretionary goods to services.
In recent months, consumers have been spending more on services such as travel and entertainment, while cutting down on non-essential purchases including clothing and home goods amid high inflation.
"Target is going to suffer more versus the others because they have a much larger consumer discretionary element to their business," Edward Jones analyst Brian Yarbrough said.
At least 16 analysts have cut their price targets on the retailer since the beginning of June as its merchandise is skewed towards discretionary items such as clothes, electronics and beauty products.
The Context
Target in May had warned of dour second-quarter results as inflation forces consumers to shun non-essential goods.
Mastercard and American Express in their latest quarters also noted a slowdown in purchases of big-ticket items, even as spending on travel and entertainment remained robust.
A recent backlash over Target's Pride collection is also expected to impact its second-quarter sales.
Jane Hali & Associates senior analyst Jessica Ramirez added more caution, saying customers might not necessarily spend extra on things that may not be used or needed this back-to-school season.
Elsewhere, the retailer recently announced the addition of the Starbucks menu to its Drive Up service following a successful pilot.
The nationwide rollout of Drive Up with Starbucks allows shoppers to order and receive beverages or food from Starbucks while picking up their Drive Up orders.
