Target CEO tackles a growing problem in retail

Aim (TGT) CEO Brian Cornell has subtly addressed one of the biggest consumer complaints across the country.

Amid record inflation, consumer prices have risen nearly 21% since February 2020, according to a recent Bankrate analysis.

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While many companies have argued that skyrocketing prices are due to inflation, Vice President Kamala Harris is skeptical, as she recently proposed a federal ban on “corporate price gouging in the food and grocery industries” during a campaign event last week.

“There is a big difference between fair pricing in competitive markets and excessive pricing unrelated to the costs of doing business,” the Harris campaign said in a statement to Fox.

During an interview on CNBC’s Squawk Box on Aug. 21, Cornell was asked if Target boosted its profits from the price hike. In response, the CEO said the company was in a “penny business.”

A Target customer looks at a display of board games while shopping at the Target store.

Justin Sullivan/Getty Images

“We’ve reduced prices on 5,000 items,” Cornell said. “But value is in our DNA. When you go back to the brand promise, ‘expect more, pay less’ is what we do every day.”

He argued that the company is in a “very competitive space” and that consumers can find lower prices on items by comparing prices online or visiting other retailers.

“It’s a money business, it’s a very competitive space, and we provide the value that consumers are looking for,” Cornell said.

Target is slashing prices due to falling sales

Cornell’s comments come after Target dropped prices on 5,000 frequently purchased items earlier this summer. The decision followed the release of its first-quarter 2024 earnings report, which showed the retailer faced a 3.7% decline in comparable store sales compared to the same quarter in 2023 and a 1.9% decline in traffic in stores.

Its operating income, which is a company’s profit after expenses, also fell 2.4 percent.

Related: Another major retailer is slashing prices on thousands of products

During a May 22 earnings call that discussed the report, Target executive vice president Michael Fiddelke said consumers are spending “with caution,” particularly in “discretionary categories.”

Looks like those price cuts paid off for Target. Its second-quarter earnings report, released Aug. 21, showed its comparable sales rose 2 percent year over year and store traffic rose 3 percent. Its operating income also increased by about 36%.

On an Aug. 21 earnings call, Cornell revealed that Target saw sales growth, particularly in apparel, beauty and food and beverage, thanks to multiple investments.

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“We feel really good about how consumers have responded to the price investments we’ve made for those 5,000 frequently purchased items, but it really exceeds those investments,” Cornell said. “If you’re a Target Circle member, you get personalized offers every time you shop. If you use a Target Circle card, you can take advantage of that 5% discount.”

Many major retailers recently opted to cut prices on thousands of popular items after reporting a drop in sales due to price-conscious consumers.

In May, Walmart revealed it had cut prices on 7,000 items to help boost in-store purchases. That same month, Walgreens and AmazonFresh also separately announced they were dropping prices on thousands of items to lure back thrifty shoppers.

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