Target has lowered its full-year sales outlook as it grapples with a combination of economic pressures, shifting consumer behavior, and internal challenges. The retailer reported weaker-than-expected first-quarter earnings and revenue, with sales declining nearly 3% compared to the previous year. Both in-store and online transactions fell by 2.4%, while the average spending per customer dropped by 1.4%. These figures highlight ongoing struggles for Target to regain growth and restore the loyal customer base that once gave it a reputation for “cheap chic.”
CEO Brian Cornell attributed much of the company’s difficulties to the broader economic environment, including ongoing uncertainty around tariffs and declining consumer confidence. He acknowledged that Target gained or maintained market share in only 15 out of 35 tracked merchandise categories, which he described as unsatisfactory. The company aims to reverse this trend by improving the shopping experience and growing market share in the majority of its product categories over the remainder of the year.
Target now expects a low single-digit decline in sales for the fiscal year, down from a prior forecast of roughly 1% sales growth. Adjusted earnings per share are projected between $7 and $9, below the earlier estimate of $8.80 to $9.80. In addition to the forecast downgrade, Target announced leadership changes and the formation of a new Enterprise Acceleration Office, led by Chief Operating Officer Michael Fiddelke. This new office will focus on streamlining operations, leveraging technology, and accelerating growth.
Key executives Amy Tu, Chief Legal and Compliance Officer, and Christina Hennington, Chief Strategy and Growth Officer, are departing the company. Hennington was seen by industry insiders as a potential successor to Cornell. Despite these upheavals, Target posted a first-quarter net income increase to $1.04 billion, or $2.27 per share, up from $942 million, or $2.03 per share, a year earlier. Revenue, however, fell to $23.85 billion from $24.53 billion in the same quarter last year. Comparable sales decreased 3.8%, with in-store sales down 5.7%, though digital sales grew 4.7%.
Tariffs have added to Target’s challenges, particularly impacting discretionary categories such as home decor, where cautious consumer spending has been evident. The company has also faced backlash from shoppers and activists for rolling back significant portions of its diversity, equity, and inclusion initiatives. Cornell cited these factors alongside the general economic climate and tariff uncertainty as weighing on performance, although he noted it is difficult to isolate the impact of each element.
On the positive side, Target saw a 36% increase in same-day deliveries through its Target Circle 360 membership program and strong sales from a limited-time designer partnership with Kate Spade, marking the company’s best performance in a decade for such collaborations. Certain categories like beverages, floral, produce, women’s swimsuits, and toddler clothing also gained market share, benefiting from seasonal events.
Regarding tariffs, Target is balancing price increases and cost management. While it will raise prices on some items to offset tariff costs, the company is working closely with vendors, adjusting sourcing, and changing order timing to limit impact. About half of Target’s merchandise is U.S.-made, and the company has reduced its reliance on China for private-label brands from 60% in 2017 to 30% today, aiming for 25% by the end of next year.
Despite ongoing cost pressures, Target remains committed to offering value, maintaining its low-price seasonal sections, and expanding affordable product offerings, including mini beauty and trendy food items. The retailer continues to navigate a challenging retail landscape while seeking to rebuild customer trust and return to growth.
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