Big box retailer, Target, has been facing a decline in customer confidence in recent weeks and the state of the economy has a lot to do with it. Consumers across all income cohorts are having to pinch pennies in some way or the other as the prices for things like food and utilities continuously increase with no sense of relief in sight for the foreseeable future. In fact, the current tariff issues and ballooning inflation rates is setting the stage for yet another price surge, particularly for the retail sector.
Target sales have dropped and are not expected to pick up any time soon
Target does not appear to be hitting the mark in customer satisfaction as of late. February reports from the supermarket giant has revealed a decline in sales across all departments within the store. Sales for February had shown a drop and to make matters worse, for the entirety of 2025, sales are only expected to grow by a mere 1%. The retailer has shared that “slumping consumer confidence impacted sales of discretionary items.” Discretionary items are those which are non-essential to consumers and are generally purchased based on desire and extra income. These include items like clothing and home goods. The big box retailer has also revealed that the majority of the company’s sales are made up of discretionary sales.
It makes sense that the retailer is noting a decline in sales, particularly discretionary sales during these precarious economic times. This decline in sales for the retailer comes hot on the heels of the January Personal Consumption Expenditures Index (PCE) which recorded a half percent drop in consumer spending.
However, a lack of customer confidence is not the only issue contributing to the retailer’s problems. According to CEO Brian Cornell, President Trump’s decision to increase tariffs on goods imported from Mexico to 25% will compel his company, along with other industry peers, to raise the pricing on basic items like fruits and vegetables. In regards to this matter, Cornell shared, “Those are categories where we’ll try to protect pricing, but the consumer will likely see price increases over the next couple of days.”
The biggest issue faced by the retailer in recent weeks, however, has been the company’s decision to distance itself from any Diversity, Equity, and Inclusion policies after Trump made the executive decision to axe all DEI policies within the federal space. As such, the conservative right wing had begun applying pressure to all major companies to follow suit and Target was amongst the companies who listened.
Now the retailer has lost a fair amount of customers and is facing ongoing boycotts as a result.
The one silver lining of the situation is that the retailer’s fourth quarter revenue and earnings exceeded any Wall Street expectations.
The Personal Consumption Expenditures Index — what is it?
Whilst inflation is rather tricky to measure, monitoring personal expenditure is the closest way to gauge pricing trends over time. It is quite simple at its crux, when consumers are not able to afford as many everyday items, inflation is rising.
When it comes to the measurement of inflation, people often assume that the Consumer Price Index is used, and whilst this is true, the PCE is also used. The difference between the two is the manner through which the data is collected.
For the CPI, pricing data is collected from household surveys, whilst the PCE is determined from business surveys. Many are of the belief that the PCE is more accurate as well. The Federal Reserve announced in January 2012 that it will be “adopting the PCE as the primary inflation measure upon which it bases its monetary policy decisions.” This decision was made by the Fed because the PCE offers a broader and timelier measure.