US retail chain Target has slashed its expectations for the year after a sharp fall in sales, which it blamed on a "highly challenging environment" amid the introduction of trade tariffs.

Its sales slumped by 5.7% in the three months to May, at a time when the company also faced a backlash following a previous decision to end diversity, equity and inclusion (DEI) targets.

Bosses declined to confirm any potential price rises due to higher import taxes, saying raising prices could be a "last resort."

Brian Cornell, chief executive of Target, said pricing decisions would depend on the retailer's efforts to source more products in the US and reduce its reliance on China.

"That is going to play a very important role," he said following the company's results.

Unlike its rival Walmart, which generates the bulk of its revenues from selling grocery items like bananas, milk, toilet paper, and shampoo, Target's big sellers are mostly in non-essential goods, such as home furniture and beauty products.

It sources the majority of such products from China, with 30% of its store-label goods from the country. That is down from 60% in 2017, but analysts have said the impact of higher import tariffs on goods from the country will be difficult to navigate.

US President Donald Trump has imposed tariffs on many countries since returning to the White House in an attempt to encourage businesses and consumers to buy more American-made goods.

Trump hopes his policy will help boost US manufacturing and jobs but economists have warned it could lead to higher prices for customers.

The US and China have agreed a truce to lower import taxes on goods being traded between the two countries, which has de-escalated the trade war between the world's two biggest economies, but US import taxes on Chinese remain higher than before at 30%.

Rick Gomez, the company's chief commercial officer, said Target was looking to negotiate with suppliers and expand the number of its suppliers beyond China, as well as adjusting the timing and quantity of orders.

"These efforts are expected to offset the vast majority of the incremental tariff exposure," he said.

Walmart revealed last week it it would raise prices due to tariffs, which prompted Trump to say the supermarket should "eat the tariffs" on imported goods instead of passing on costs.

Target said on Wednesday it now expects a low-single digit decline in annual sales. It previously forecast net sales growth of around 1%.

In January, Target announced it was ending its DEI targets.

The Trump administration is opposed to such policies, which has resulted in a host of major firms cutting back on initiatives.

The chain was sued by a group of shareholders earlier this year, led by the City of Riviera Beach Police Pension Fund in Florida, who argued Target had defrauded them by allegedly concealing the risks associated with its DEI policies.

The lawsuit referred to a 2023 backlash over LGBTQ+ merchandise at its stores, which caused both its sales and its stock price to drop, and led to boycotts.

Mr Cornell said the reversal of some DEI policies played a role in first-quarter performance, but that he could not quantify the impact.