Target CEO Says Consumer Budgets Are Being ‘Stretched’

As economic uncertainty and rising costs continue to impact consumers, shoppers are more cautious with their spending, according to Target CEO Brian Cornell. Faced with a volatile financial landscape, many are making deliberate purchasing decisions, prioritizing essentials and seeking value.

“Consumers tell us their budgets are being stretched,” Cornell said Wednesday (Nov. 20) during the company’s third-quarter earnings call. “They’re becoming resourceful, focusing on deals, then stocking up when they find them. Consumers allow themselves to splurge a little bit when they find the right item.”

This cautious spending behavior was reflected in Target’s third-quarter results, which showed modest growth amid a challenging retail environment. The company reported a 0.3% increase in comparable sales, down from its 2% growth in the second quarter. This slower pace underscored the ongoing volatility in the consumer market, as shoppers, still contending with economic pressures, have become more discerning in their purchasing habits.

PYMNTS Intelligence recently reported the percentage of consumers living paycheck to paycheck has hit 67%, while most consumers meeting their monthly expenses carry credit card balances.

“Beyond resilience, consumers have become extremely resourceful and willing to shop among various retailers to find deals,” Target Chief Commercial Officer Rick Gomez shared with analysts during the earnings call. “There’s continued volatility across our business, with a softness in discretionary categories (home and apparel). Beauty is our strongest category. There were strong reactions to promotions during the quarter. Promotional markdown rates increased and there was a dip (in spending) the week before and after Target Circle Week in October.”

Target’s home and apparel categories, which have historically been strong performers, showed signs of softening in the third quarter, as sales decreased by 4 percentage points compared to the previous quarter.

“We see softness in these categories, but we are confident that consumers will return once the macroeconomic headwinds ease,” Cornell said. “We continue to take share in home and apparel. We’ve got to make sure we’re staying in step with the consumer. We know consumers are looking for more value, promos, and deals when shopping for everyday essentials. That’s a trend we’ll see in the fourth quarter and continue in 2025. We have to embrace and understand the macro short-term headwinds.”

At the same time, categories such as beauty and essentials fared better, driven by continued consumer interest in high-frequency items. Beauty recorded a 6% increase in comparable sales, fueled by introducing new products that resonated with younger shoppers, particularly Gen Z, Gomez noted.

Target continued to see strong growth in its digital channels, reporting a 10.8% increase in digital comparable sales, driven by nearly 20% growth in same-day delivery services powered by Target Circle 360 and double-digit increases in Drive Up orders. Additionally, traffic rose 2.4% during the quarter, representing 10 million incremental transactions, Cornell said, offset by a 2% decline in average ticket.

“We focus on traffic as a key indicator of guest engagement,” Cornell said. “Traffic shows we’re winning with our guests. We’re going to play the long game. Even in a difficult third-quarter environment, one of the things we highlighted is the increase in traffic. We enrolled 3 million new Target Circle members this quarter. This program allows us to learn more about our guests and their preferences. We feel really good about the fact that consumers are choosing Target. We’re going to lean into our digital assets.”

Despite the challenges and fourth-quarter guidance projecting flat comparable sales growth, Target is committed to its long-term strategy of investing in value, newness, and its digital infrastructure.

“We have a singular focus on value,” Cornell said. “As we encounter short-term headwinds, we immediately focus on leveraging our assets and strategy to move beyond those headwinds. It all starts with the consumer, focusing on our guests and building great engagement with them. We certainly see upside in the future. We’re leaning into the things consumers want.”