Target CEO Defends Against 'Price Gouging' Allegations in Retail Realm
In the highly competitive retail sector, there is simply no place for price gouging, declared Target CEO Brian Cornell on Wednesday. During an interview on CNBC’s “Squawk Box,” the retail leader firmly refuted the campaign accusations that grocers have been inflating prices. He emphasized that retailers must be acutely responsive to customers’ needs; otherwise, they risk losing valuable business.
CNBC’s Joe Kernen brought up the remarks made by Democratic presidential nominee Vice President Kamala Harris and posed the question to Cornell: whether Target or its competitors have ever reaped benefits from price gouging. Harris had proposed the first-ever federal ban on “corporate price-gouging in the food and grocery industries” just the previous week, alleging that certain companies were charging exorbitantly and thereby fueling household inflation.
“We’re in a penny business,” Cornell retorted, highlighting the razor-thin profit margins that characterize the retail industry. He elaborated on the numerous avenues available to customers for price comparison. They could visit physical stores, scour the internet on their phones to contrast the prices of items like a gallon of milk across different retailers, and easily seek out lower-priced alternatives or locate merchandise elsewhere. These comments from Target’s chief came on the heels of the discount retailer surpassing Wall Street’s earnings and revenue expectations on Wednesday. However, it also struck a note of caution with its full-year guidance. The company anticipates that comparable sales, which exclude the impact of store openings and closures, will fall on the lower end of its projected range of flat to up 2%. Nevertheless, it did raise its profit guidance, projecting adjusted earnings per share to range from $9 to $9.70, up from the prior outlook of $8.60 and $9.60.
Inflation and consumers’ growing exasperation over high prices have continued to cast a long shadow over companies like Target. Over the past two weeks, a broad spectrum of retailers, including Home Depot, Walmart, and Macy’s, have reported that cautious consumers are being highly selective about their spending destinations.
Cornell stated on “Squawk Box” that Target is striving to appeal to “a consumer who is managing their budget carefully” and asserted that “value is in our DNA.” Target is among the consumer brands that have taken proactive steps to address shoppers’ concerns by slashing prices. It reduced the prices of approximately 5,000 everyday items, such as diapers and peanut butter, in an attempt to boost foot traffic and drive sales. Other companies, like McDonald’s, have introduced value meals.
So far, these discount initiatives at Target seem to be hitting the mark: In the most recent quarter, customer traffic across both Target’s physical stores and its website climbed 3% — even though shoppers were putting slightly less in their shopping carts compared to a year ago.
Walmart CEO Doug McMillon noted last week that prices have declined in many merchandise categories. However, he lamented that inflation “has been more stubborn” in the aisles stocked with dry groceries and processed foods.
During an earnings call with investors, McMillon said some brands “are still talking about cost increases, and we’re fighting back on that aggressively because we think prices need to come down.”
In conclusion, while retailers like Target and Walmart are navigating the choppy waters of inflation and price pressures, they are acutely aware of the need to keep prices in check to retain customers. The actions they are taking, from price cuts to value meal introductions, are all part of a broader strategy to stay competitive and meet consumers’ demands in these challenging economic times.