In this edition of the Glossy+ Research Briefing, we analyze Target Corp.’s full-year fiscal 2024 earnings results and measure strategies the retailer is using to weather a potentially flat sales year in 2025.
Target saw minimal sales growth in 2024, but its Roundel retail media network’s ad revenue fared better
Amid persistent inflation, high interest rates and strong competition from discount retailers, convincing shoppers to buy clothing and other discretionary merchandise has proven difficult for Target. But the retailer is not waiting for the economic winds to shift. Instead, Target is making strategic moves to brace for the impact of slower sales.
“While we recognize that a rebound in discretionary spending will favor our brand and our business, we’re not waiting for economic changes or a different consumer outlook,” said Target CEO Brian Cornell.
Target’s full-year 2024 net sales saw minimal growth of around 1%, excluding the impact of an extra sales week in 2023. Target shares dropped 5% on Tuesday as the stock market reacted sharply to the company’s earnings results. Target additionally told investors it’s expecting to see a “meaningful” drop in profits during its current quarter because of soft sales in February. As of this writing, shares of the company are still down 5%.
Sales trends results comparing full-year 2024 and 2023 show advertising revenue from Target’s Roundel business increased 25% year over year, beauty sales grew by 5% and apparel saw a small 0.1% bump. Target is looking to sustain that momentum in 2025.
One way Target is hoping to sustain ad revenue — especially amid a sales downturn — is by leveraging consumer data to provide targeted ads. Target Plus, the retailer’s third-party marketplace that competes with Amazon’s and Walmart’s third-party marketplaces, gives sellers access to Target’s extensive customer base. In return, Target gains access to the sellers’ customer data. Additionally, Target’s retail media network Roundel partners with 2,600 vendors which gives the retailer access to an even wider warehouse of customer data, and allows Target to serve customers personalized ads that speak directly to their interests and preferences.
Cara Sylvester, chief guest experience officer at Target, said during Tuesday’s earnings that Target is integrating more technology to achieve smarter ad placements. An Apple holiday campaign in partnership with Target was the first time the tech giant showcased its new double tap feature on the Apple Watch Series 9 in an ad spot. Target also added personalized AI recommendations and boosted search results to its site to highlight products from the holiday campaign and offered special promotions for Target RedCard members.
By tapping into a “powerful ecosystem of digital, social, marketing and merchandising [that] absolutely resonated with shoppers,” Target was able to “deepen relationships with existing fans and attract new ones with a significantly higher new guest rate compared to prior Apple campaigns at Target,” shared Sylvester on the call.
In a press release this week, Target shared plans to “dramatically expand the size” of its marketplace and grow third-party digital sales from about $1 billion in 2024 to more than $5 billion in 2030. The plan is part of Target’s long-term strategy to offer on-trend and affordable product assortments, a blended omnichannel experience, and reliable supply chain and fulfillment capabilities, especially for TargetCircle members, according to the press release.
However, a 40-day consumer boycott of Target in reaction to recent changes the retailer made to its DEI policy, couldn’t come at a worse time for the company. Target announced in January it would be dialing back its commitments to DEI initiatives. Including participating in all external diversity-focused surveys, like the Human Rights Campaign, an LGBTQ advocacy group. Target also said it would be “further evaluating” corporate partnerships and changing its “supplier diversity” team to “supplier engagement.”
Rev. Jamal Bryant, a prominent Atlanta pastor, has asked shoppers, specifically Black shoppers, to protest the policy change with their pocketbooks. “We’re asking people to divest from Target because they have turned their back on our community,” Rev. Bryant told CNN.
Target has already felt backlash from the policy change since it made the announcement on Jan. 24. Joseph Feldman, an analyst at Telsey Advisory Group, said his company’s analysis of Target’s site data “shows a clear drop in traffic in late January into mid-February following the company’s step back from DEI.”
Now, Target and the brands on its shelves, are bracing for a deeper slowdown in sales since the boycott kicked off on Wednesday. Some Black-owned brands have shared fears about how the boycott could affect small, minority-owned businesses.
Melissa Butler, founder of The Lip Bar beauty company shared her thoughts on TikTok. “The immediate risk is that if all of our consumers boycott Target, then that will absolutely impact us. And many people are saying, ‘You know, well, I would rather shop you on your site,’” she explained. “Here’s the thing, I understand. I, too, am disappointed, and you have the ability to take your dollar wherever you feel most comfortable… But I do want to make sure that we are aware that, you know, by not shopping in these stores, you are also impacting the hundreds of Black-owned businesses and women-owned businesses.”
