The Stock of Target Drops as Earnings Fall Below Forecasts and the Outlook is Lowered

Target Corp. reported a difficult start to the year, falling short of Wall Street expectations for earnings and lowering its profit guidance for the rest of 2025. The discount retailer cited a variety of challenges, including declining customer traffic, reduced discretionary spending, and broader economic uncertainties.

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In a call with analysts, CEO Brian Cornell described the first quarter as “exceptionally challenging,” noting a drop in both customer visits and overall sales—particularly in non-essential categories. According to a transcript from FactSet, Cornell attributed the company’s struggles to multiple headwinds, including a prolonged decline in consumer confidence, backlash over changes to Target’s diversity and inclusion initiatives earlier this year, and concerns about tariffs.

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Cornell highlighted tariffs as one of the most complex issues currently affecting the business, describing the situation as “incredibly difficult.” He explained that the company is grappling with high tariff rates and lingering uncertainty about how affected product categories will evolve. “We have several tools at our disposal to offset the impact of tariffs,” he said, “and raising prices is a last resort.”

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In its earnings release, Target said that while overall results were softer than expected, it did experience stronger performance during specific retail moments like Valentine’s Day and Easter. However, these surges were not enough to overcome the broader slowdown.

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Looking to reverse the negative momentum, Target announced a new internal initiative designed to boost efficiency and accelerate its strategic goals. This includes the creation of an “acceleration” office, led by Chief Operating Officer Michael Fiddelke, and leadership changes aimed at improving decision-making and operational speed.

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The disappointing earnings report weighed heavily on investor sentiment. Target’s stock dropped 6.2% in premarket trading following the announcement, making it the largest loser among S&P 500 companies before the market opened.

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For the first fiscal quarter ending May 3, Target posted adjusted earnings of $1.30 per share, down sharply from $2.03 during the same period last year. The figure also fell short of analysts’ expectations of $1.61, according to FactSet. Revenue for the quarter declined 2.8% to $23.85 billion, missing the consensus estimate of $24.23 billion. Comparable store sales—a key retail metric—fell 3.8%, more than the 2% decline anticipated by analysts.

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Despite the overall weakness, Target did see a 4.7% increase in digital comparable sales. This growth was driven by the company’s same-day delivery program, Target Circle 360, and its Drive Up curbside pickup service, which brings purchases directly to customers’ cars.

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Target also revised its full-year profit outlook, reducing its projected adjusted earnings per share range to between $7.00 and $9.00. This is down from a previous estimate of $8.80 to $9.80 per share.

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The retailer’s underwhelming performance stands in stark contrast to that of its chief competitor, Walmart Inc., which recently exceeded earnings and comparable sales forecasts while reaffirming its guidance for the year. Walmart’s ability to outperform in the current environment has heightened investor concerns about Target’s competitive position.

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Meanwhile, Home Depot—another major player in the retail space—indicated earlier this week that it has no immediate plans to raise prices in response to tariffs. This position differs from Walmart’s recent announcement that tariffs could lead to higher consumer prices, a development that reportedly upset former President Donald Trump.

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So far in 2025, Target shares have dropped 27.4%, significantly underperforming the broader market. In comparison, the benchmark S&P 500 index has gained 1% year-to-date. This wide gap reflects investors’ growing concerns about Target’s ability to navigate the current retail and economic environment.

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While the company hopes to turn things around in the coming quarters, the combination of weak consumer sentiment, inflation pressures, and geopolitical uncertainty makes that task difficult. Cornell emphasized that Target remains committed to improving traffic and operational execution, but acknowledged the path forward is complicated and requires decisive action across all areas of the business.

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With mounting pressure from both investors and competitors, the coming months will be critical as Target works to stabilize performance and regain lost ground in a volatile retail landscape.

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