• Target reported sliding sales in its first quarter to May 3.
• CEO Brian Cornell said sales "fell short of our expectations" in a "highly challenging environment."
• Cornell also said post-tariff price increases would be a "last resort."

Target sales fell sharply in the three months to May 3, in a period marked by its decision to roll back DEI initiatives in January.

In an earnings call Wednesday, Target CEO Brian Cornell said the reaction to the DEI changes was one of several "additional headwinds" that had an adverse impact on sales, but the company could not quantify the amount.

Business Insider reported in March that the consumer analytics firm Numerator found customer foot traffic and market share had shifted from Target to Costco, particularly among shoppers who value DEI.

With respect to tariffs, Rick Gomez, Target's chief commercial officer, said on the earnings call that "adjusting prices" was one of several steps the company was taking to manage new import costs.

Comparable sales fell by 3.8%, store traffic was down 2.4%, and the average transaction size decreased by 1.4%.

Store-originated sales declined 5.7%, but were partially offset by a 4.7% growth in digital sales, led by a 36% surge in same-day delivery via Target Circle 360.

"We have many levers to use in mitigating the impact of tariffs and price is the very last resort," Cornell said.

Some alternatives to price hikes include sourcing more products from the US rather than China, negotiating with suppliers, adjusting the timing of deliveries, and eliminating products from the retail assortment, Gomez said.

Bullseye's Playground vow

Gomez also said that about half of the products Target sells are sourced in the US, and that it's on track to reduce its share of imports from China to 25% from the 60% share it imported in 2017.

In addition, he highlighted the low-price section at the front of the store, known as Bullseye's Playground.

"We have made a commitment to keep those at $1, $3, and $5," Gomez said. "It's important to the brand, and it's important to the guests."

Looking ahead, Target said it expects a low-single-digit decline in sales for the full year.

Stock fell more than 6% in premarket trading and was down 28% this year at Tuesday's close.

It also announced an "acceleration office" led by Michael Fiddelke, the company's former CFO and current COO, aimed at speeding up strategic execution and reversing recent declines.

Amy Tu, the chief legal and compliance officer, and Christina Henningon, the chief strategy and growth officer, are both leaving the company.

Net income rose by $62 million to $1.04 billion for the period.

• Home Depot said it would maintain pricing levels despite the impact of tariffs.
• The CFO cited strong supplier ties and productivity for the move.
• The retailer posted a rise in first-quarter sales, while earnings dipped.

Home Depot said it had no plans to pass on the cost of tariffs to consumers despite their financial impact.

"We intend to generally maintain pricing across our portfolio," the home improvement retailer's head of merchandising, Billy Bastek, said during Tuesday's earnings call. "We don't see broad-based price increases for our customers at all going forward."

Executives said on the call that half of Home Depot's inventory was sourced from within the US, and that no single country will represent more than 10% of its supply base by this time next year.

"We have a number of different levers," Bastek added.

Speaking earlier to CNBC, CFO Richard McPhail cited the retailer's scale, close partnerships with suppliers, and supply chain productivity as key factors enabling it to absorb rising costs.

Bastek said on the earnings call that maintaining prices could help Home Depot (and its supplier brands) take market share from competitors that end up charging more.

The comments follow Walmart's announcement that it would raise prices in the coming weeks in response to the financial impact of President Donald Trump's tariffs.

Retail analysts told Business Insider that Walmart's move gave other retailers air cover to follow suit, if they so choose.

McPhail's comments come as Home Depot posted a 9.4% rise in first-quarter sales to $39.9 billion, although comparable sales fell by 0.6% due to the impact of foreign exchange rates.

Net earnings fell $200 million to $3.4 billion compared with the same period last year.

CEO Ted Decker said in a statement that the first-quarter results were in line with expectations.

"We feel great about our store readiness and product assortment as spring continues to break across the country," he said.

Home Depot maintained its full-year guidance of a 2.8% rise in total sales and an approximately 1% increase for comparable sales.

The stock rose 0.3% in afternoon trading and is down 2% this year.