No bull’s-eye

Recession-wary shoppers have meant a dip in net earnings for Target this year. The retailer’s profits were down 5.8% in Q1, the company reported in an earnings call on Wednesday.

Target’s year over year sales, however, were up 0.5% from this time last quarter, and its comparable sales, at stores open for at least one year, were up 0.7%.

Nevertheless, the mix of products shoppers are buying could spell leaner times ahead for Target. Shoppers spent less on discretionary items like, electronics, home goods, toys, and apparel, the retailer said, while spending more on food, beverages, and other essentials. About 54% of Target’s sales are in discretionary categories, according to the Wall Street Journal.

“The consumer is under pressure,” Christina Hennington, Target’s chief growth officer, said on the investor call. “The consistent inflation, the running out of savings as well as just economic uncertainty in general is having an impact on their choices and they’re making trade-offs.”

Target reduced its inventory 16% over the first quarter of last year in response to changes in consumers’ habits. That includes a 25% reduction in its inventory of discretionary items.

Despite the drop in profits, Target did not adjust its sales and profit projections for the fiscal year.

It hasn’t been the only retailer impacted by reduced discretionary spending. Home Depot reported declining sales on its earnings call on Tuesday.

“Organized retail crime” could contribute to $1.2b in shrink. Target also anticipates $1.2 billion in shrink this year, up $500 million from last year. CEO Brian Cornell identified “theft and organized retail crime” as “increasingly important drivers of the issue.” Organized retail crime, as opposed to shoplifting, involves criminal groups stealing items and reselling them.

“The unfortunate fact is violent incidents are increasing at our stores and across the entire retail industry,” Cornell said. In response, Target plans to increase security and lock up certain products, but not to close stores, according to CNBC.