Target experienced a drop in sales during the second quarter due to inflation concerns among shoppers and a negative reaction to its Pride Month merchandise. The retailer expects that high interest rates and higher food prices will continue to strain customers, leading to a decline in sales for the remainder of the year. As a result, Target has lowered its profit outlook for the year. Despite the lowered forecast, Target's profit for the quarter exceeded expectations, thanks to a reduction in inventory and cautious spending by customers.

CEO Brian Cornell attributes the decline in sales to higher prices for essential items, which are consuming a larger portion of customers' paychecks. Additionally, some customers have redirected their spending towards travel and other activities outside of the home. The backlash over the Pride Month collection also negatively impacted sales. Some items were removed due to confrontations between customers and employees, as well as incidents of merchandise being thrown on the floor. Target has pledged to be more cautious with its partnerships in the future while still celebrating heritage moments.

Target's second-quarter sales decline is expected to draw attention as other major retailers report their financial results, including Walmart. Despite the challenges, Target's shares rose by nearly 6% in early morning trading on Wednesday.