The Minnesota retailer reported on Tuesday a 58% increase in profits, and quarterly revenue was up nearly 2% to $31.92 billion decisively beating Wall Street estimates. But Target still isn’t breathing a sigh of relief. 

Comparable sales dipped 4.4%, a continuation—albeit slowing—of a downward trend for Target. Things aren’t likely to turn around soon. The company expects a 3-5% sales decline in 2024’s first quarter, according to its fourth-quarter earnings report.

Neil Saunders, managing director of GlobalData, said in a Tuesday note that the sales decline is a “worrying portent that the consumer remains in a tough spot.”

“The revenue weakness reflects the broader economic trend of Americans cutting back on non-essential spending which has hit Target, with its discretionary offer, particularly hard,” he said.

McKinsey & Company reported in February that while customers are shopping as frequently as they used to, they are buying fewer items. Over three-fourths of shoppers say they’ve changed how many groceries they’re buying because the price has increased. Nearly the same percentage reported trading down, or buying the same product of a lesser quality, in order to save money. 

Squeezed customers are cutting back on shopping almost everywhere. The Commerce Department reported a 0.8% drop in retail sales in January, greater than expected. Macy’s announced last month that it’s closing 150 stores over three years after posting declining fourth-quarter sales. Other mall retailers are coping with the same issue. Victoria’s Secret had a pessimistic 2024 forecast on Thursday, projecting a third straight year of a decline in sales, and Nordstrom’s fourth-quarter earnings posted Tuesday said its 2024 revenue could drop as much as 2%.

Notably, Walmart is the exception to retail’s rocky road: The company last month reported a 4% year-over-year leap in comparable store sales, exceeding expectations. That’s bad news for Target, which, despite facing similar challenges to Walmart, has failed to find the same success.

Target has been able to improve on its traffic and comparable sales through its conservative inventory management, part of its strategy to become more resource efficient. Target CEO and chairman Brian Cornell said customers have responded to new products and private brands.

“Throughout the season, guests responded to newness, value, and the inspiration and ease of our in-store and digital shopping experience. Looking ahead, we’ll continue to invest in the strengths and differentiators that have delivered strong financial performance over time,” Cornell said in Target’s 2023 earnings report. 

However, some of Target’s strategies have turned off customers, Saunders warned. In order to mitigate theft-induced shrink, Target has begun limiting the amount of items customers can purchase in self-checkout lines in some locations, and locking up more inventory behind glass cases, forcing customers to wait longer to receive assistance. Walmart has done the same.

Saunders argued Target is also struggling with a “lack of newness” with products, particularly apparel, which runs counter to its once-lauded cheap-chic image and priority of developing exclusive brands.

“We do not believe that Target always helps itself,” Saunders said. “In our view, there is a general malaise creeping into a business that was once always on the front foot.”

Target did not respond to Fortune’s request for comment.

Target’s hopes to hit its mark down market

Ditching its bougie “Tar-jay” rep in order to accommodate consumer’s cutting back, Target is copying notes from its competition.

Target made key changes to its inventory and model in the past few months, hoping to drive sales. In February, it launched its dealworthy line of 400 budget items, mostly essentials and apparel under $10. The decision aligns with McKinsey’s data about consumer behaviors, as well as the Food Industry Association’s 2023 survey that indicates over half of shoppers plan to buy more private-brand items. But Marshall Fisher, professor of operations, information, and decisions at Wharton, told Fortune last month the product line defies Target’s strategic position. The retailer could also have trouble competing with Walmart’s low prices.

“Producing a bundle of 400 low-cost products could be viewed as a Hail Mary, like they’re desperate,” Fisher said.

The retailer took another page from Walmart’s playbook in launching the Target Circle 360 loyalty membership service on Tuesday. In a bid to compete with similar membership programs like Walmart+ and Amazon Prime, Target Circle 360—which will cost customers $99 per year—promises free two-day shipping on online orders and unlimited same-day delivery under an hour on orders over $35.

Walmart has already responded, expanding on-demand delivery services that are part of its Walmart+ subscription service to orders placed as early as 6 a.m. The subscription program has been a boon for Walmart, as online and in-person grocery sales have not only helped the retail giant grow sales, but also eclipse Amazon in the online grocery market.

Walmart’s success with Walmart+ suggests Target could mirror the strategy with success. Saunders said in a time of customers feeling squeezed and turning away from Target, there’s extra pressure for the company to return to its innovative ways.

“Target needs to pull out every stop to make shopping engaging, fun, and easy,” he said. “This is Target’s heritage, but it must take great care to retain and polish these skills.”