Target excess inventory last quarter was bound to hurt its bottom line. It chose to rip off the Band-Aid, but the pain isn’t quite over yet.
The retailer said on Wednesday that comparable sales grew 2.6% in its quarter ended July 30, lower than the 3.2% growth that analysts polled by Visible Alpha were expecting to see. Consumers appear to still be cautious about spending, though they are buying small indulgences. The fastest-growing category was food and beverage, for which comparable-store sales grew at least 10%, Target said on its earnings call on Wednesday morning. The runner-up was beauty, which grew by a high-single-digit percentage. Though demand for electronics and home goods has waned, Target is still seeing healthy demand for some discretionary categories such as toys, luggage, seasonal goods and fashion-forward apparel.