“Some of our guests clearly are uncomfortable with our policy, and some are really supportive,” said Cathy Smith, Target’s chief financial officer, in a conference call wither reporters.
Target earlier this year weighed in during a national debate over a law in North Carolina requiring people to use bathrooms in public facilities that correspond to their gender at birth. It issued a statement in April saying that the company stands for inclusivity and welcomes people to use the bathroom that corresponds to their gender identity.
There had been some backlash to that move on social media, and an online petition was created encouraging shoppers to boycott Target over the policy. Some opponents protested outside of their local store.
When asked whether boycotts or other dissatisfaction over the bathroom policy had contributed to weak sales growth in the most recent quarter, Smith said, “It’s difficult to tease out one thing that’s driving results.” She added that based on the evidence the team has today, the impact of the bathroom issue has “really not been material.”
Most of Target’s stores already have a single-stall bathroom, but this latest investment will ensure every store in the fleet offers that option to shoppers.
Target spoke about this issue as it reported quarterly earnings results, which showed the store’s turnaround hit some turbulence this summer. The big-box retailer said that traffic declined in its stores for the first time in nearly two years.
Sales slid 7.2 percent, which the company said was fueled by several factors: Consumer electronics sales were dismal, and executives said its grocery departments need improvement. Executives also referred repeatedly to a need to “rebalance” their message to attract value-oriented customers.
Target has been particularly focused lately on spiffing up categories such as fashion and home goods, the kinds of products that they believe can help them rekindle an upscale “Tar-jhay” reputation. But the talk of rebalancing suggests the retailer swung the pendulum too far toward these style products and neglected to emphasize the household essentials that are often the impetus of a trip to the store.
Target also offered a fairly gloomy forecast for the rest of 2016, slashing its earnings forecasts and saying it expected flat to lower sales at its stores open more than a year.
“Our number one focus as we sit here today is driving traffic back to our stores,” said Brian Cornell, Target’s chief executive, on a conference call with investors.
Cornell contended the retailer was hampered by a “difficult retail environment” and a “cautious” consumer in the quarter. That doesn’t quite align, though, with how others in the industry have characterized the recent consumer climate. Home Depot reported robust earnings results Tuesday and executives at the home improvement chain said shoppers appeared to be eager for big-ticket items. Consumer spending was the key driver of economic growth in the second quarter, and the National Retail Federation recently revised its forecasts upward for industry-wide growth this year, citing high consumer confidence and the expectation of improved consumer spending.
Target’s stock was down nearly 7 percent in early morning trading.
Softness in the electronics department contributed heavily to Target’s sagging sales this quarter. In fact, Cornell said sales of Apple gear nosedived some 20 percent in the quarter. On a conference call with investors, one analyst asked whether this particularly reflected weakness in the iPhone, since the latest version of that device has been on shelves for a while now. But Cornell said weakness was seen across the stable of Apple products.
Online sales grew 16 percent at Target this quarter, a slowdown from the 23 percent year-over-year growth seen in the previous quarter. The retailer stressed, though, that it continued to see improvement in its conversion rate, or the rate at which people go from browsing to buying. That suggests customers are finding it easier to use its website and app.
Target’s earnings did offer some reasons for optimism about the future. Categories such as baby, kids, wellness and higher-end “style” products delivered comparable sales that outpaced results overall. Grocery sales, also, proved stronger at some Los Angeles area stores where it is testing a new layout and merchandising, suggesting they might be rolled out more broadly.
Overall, though, Target’s revenue for the quarter slipped to $16.17 billion, while profit tumbled 9.7 percent to $680 million, or $1.16 per share.