MINNEAPOLIS – Target Corp. reported a disappointing first quarter and lowered its full-year guidance as it grapples with soft consumer demand, political backlash, and tariff-related cost pressures.
For the fiscal first quarter ended May 3, the Minneapolis-based retailer posted revenue of $23.85 billion, missing analysts’ expectations of $24.27 billion. Comparable sales fell 3.8%, driven by a 5.7% decline in store sales, partially offset by a 4.7% increase in digital sales, fueled by a 36% rise in same-day delivery through Target Circle 360.
Adjusted earnings per share were $1.30, well below the $1.61 that analysts had forecasted. While net income rose year over year to $1.04 billion, operating margin slipped to 3.7% (excluding litigation gains), down from 5.3% a year ago.
Target also revealed it held or gained market share in only 15 of the 35 merchandise categories it tracks. “We’re not happy with that,” Cornell said. “We’ve got to be growing [market] share in 60, 70, 80% of those categories. That’s our focus over the balance of the year, and we’re going to do that by making sure we provide a great shopping environment.”
Executives pointed to a challenging retail environment marked by declining discretionary spending, consumer uncertainty around tariffs, and fallout from the company’s rollback of DEI policies in January. Cornell said that the company had fallen short of expectations due to “ongoing pressure in our discretionary business, plus five consecutive months of declining consumer confidence, tariff uncertainty and the reaction to the updates we shared on belonging.”
In response, Target slashed its full-year sales forecast, now expecting a low-single-digit decline, compared to earlier expectations of modest growth. It also lowered its adjusted EPS guidance to between $7.00 and $9.00, down from $8.80 to $9.80.
Tariff costs are a growing concern. Target is working to offset impacts by diversifying its supply chain and shifting private-label production out of China. “We brought that down to 30%, and we are well on our way to be less than 25% by the end of next year,” said Chief Commercial Officer Rick Gomez. “We are expanding into new countries, Asia as well as the Western Hemisphere, but I think it’s important to note that we’re also exploring opportunities here in the U.S.”
Despite repeated questions, Cornell did not clarify how tariff costs might affect prices. “Pricing is a very dynamic part of our business,” Cornell said, noting price changes are an ongoing effort. “We make adjustments literally each and every week.” Still, he emphasized, “We have many levers to use in mitigating the impact of tariffs and price is the very last resort.”
In an effort to improve performance, Target created a new Enterprise Acceleration Office, led by COO Michael Fiddelke, tasked with streamlining operations and reigniting growth. The company also announced the departure of two senior executives, Amy Tu and Christina Hennington, the latter of whom was considered a potential CEO successor.
While discretionary categories continued to struggle, Target saw bright spots in groceries, seasonal events, and fashion. The retailer reported strong traffic during Valentine’s Day and Easter, and its Kate Spade designer collaboration delivered its best results in a decade.
Nevertheless, shares of Target dropped more than 7% following the results, underperforming key rivals. Analysts remain cautious amid market share losses to competitors like Walmart and Costco.
