The target shows a recession warning: Shoppers are buying fewer clothes and more necessities

New York (CNN) Shoppers are retreating to Target, Home Depot and other big chains as they face pressure from higher prices and borrowing costs.

Target’s total sales rose 0.5% during the most recent quarter from a year ago, the company said Wednesday. But digital sales fell, and the company said customers were pulling back on discretionary purchases in what CEO Brian Cornell called a “very challenging environment” for consumers.

Target̵[ads1]7;s (TGT) Sales at stores open at least a year rose 0.7%, and the company said customers spent more on food and essentials. The result fell 5.8% in the quarter.

It is the latest retailer to say customers were pulling back on items such as clothing and home goods and moving to groceries and essentials. Low- and middle-income consumers have been pressured the most by rising prices.

Neil Saunders, a retail analyst at GlobalData, said this hurt Target because the chain relies on impulse buys and shoppers filling their carts with items that catch their eye as they browse stores.

“The carefree shopping spree has been replaced by more focused missions where people set budgets and are less willing to deviate from them,” he said in a note to clients.

Theft is increasing

Target also warned that losses, fueled by shoplifting and organized retail crime, will reduce profitability by more than $500 million this year compared with a year ago.

Retailers in some areas of the country have said that petty shoplifting, as well as organized gangs that steal goods and resell them online, have hurt their businesses. Target and other chains have locked products to deter shoplifting.

But Target is one of the few chains to estimate its losses, known in retail as “shrink.” Shrink also comes from employee theft, faulty products and other errors.

Retail shrinkage reached $94.5 billion in 2021, a 53% jump from 2019, according to the National Retail Federation’s annual survey of about 60 retail member companies.

But the impact of shoplifting on retail losses may have been overestimated in some cases.

Walgreens said it saw an increase in losses during the pandemic and cited organized retail crime in its decision to close five San Francisco stores in 2021. But that recently reversed.

“Maybe we cried too much last year” about shrinking numbers, a Walgreens executive said in January.

Target’s stock fell slightly below pre-market Wednesday.

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