Target reported another quarter of declining sales and profits as it works to regain its footing with customers facing higher prices almost everywhere, but the retailer offered a profit outlook that topped Wall Street expectations and signaled quarterly sales growth ahead.
The Minneapolis-based company said it earned $2.30 per share, or $1.05 billion, for the three months ended Jan. 31, down from $2.41 per share, or $1.10 billion, a year earlier. Adjusted earnings per share were $2.44 for the latest quarter. Sales fell 1.5 percent to $30.45 billion for the period, and full-year sales declined nearly 2 percent to $104.78 billion.
“Target is struggling to show up for customers in a consistent and compelling way. There are too many out of stocks, too little inspiration in ranges, too much muddle and mess in stores. And all these things are eroding sales, as evidenced by the 3.9% fall in store comparables over the period,” Neil Saunders, managing director of GlobalData, told CBS News. “There is no way to sugarcoat it: Target underperformed over the holiday quarter.”
Analysts polled by FactSet had been expecting $2.16 per share on sales of $30.46 billion. Target said it expects net sales to rise about 2 percent for the year, to roughly $106.88 billion, and forecast earnings per share in a range of $7.50 to $8.50. That compares with analysts’ expectations of $7.30 per share, according to FactSet.
Target also said comparable-store sales, which measure sales at established stores and online channels, fell 2.5 percent in the most recent quarter, following a 2.7 percent decline in the fiscal third quarter. The company noted that comparable sales rose to start the current quarter, and that customer traffic and sales accelerated in the final two months of the period. Target reported sales growth in food and beverage, beauty and toys for the latest quarter.
Shares rose about 1.5 percent in premarket trading after the results were released.
The results underscore the challenges facing Michael Fiddelke, the company veteran who took over as CEO last month. Fiddelke, who served 20 years at Target, is expected to lay out details of his turnaround strategy during the retailer’s annual meeting. Investors are looking for a return to the mix of style and value that earned Target the nickname “Tarzhay” in years past.
Fiddelke has moved quickly on personnel and operations, reshuffling the leadership team, increasing spending on in-store staffing, and making cuts at distribution facilities and regional offices, according to a memo to employees in February. He has also begun reworking private-label brands, including the home goods label Threshold, and announced a merchandise collaboration with clothing brand Roller Rabbit that is scheduled to appear at Target for a limited time.
“As poor as the numbers are, Target gets something of a pass this quarter. Not because there are excuses for this performance, but because there has been a change at the top – and with it has come a change in tone,” Saunders said. “Can Target turn things around? It won’t be plain sailing, as issues like investment at a time of compressed profit will need to be squared. And customer trust will need to be rebuilt. However, goodwill for the Target brand remains, and if customers are presented with something better, they will, over time, respond positively.”
Industry analysts and researchers said a mix of factors has contributed to Target’s weakness. Customers have complained about untidy stores and lackluster merchandise, and as the company has used many of its nearly 2,000 stores as shipping hubs for online orders, shoppers say floor service has suffered because staff are fulfilling digital orders instead of tending store aisles. At the same time, competition has intensified from rivals such as Walmart, which has increased its emphasis on fashion and other goods and has been gaining market share as many shoppers trade down amid higher prices.
Political and social controversies have also played a role. Target’s hometown of Minneapolis has been a focal point for national debates over immigration enforcement, and some stores became flashpoints in protests related to actions by U.S. Immigration and Customs Enforcement. The company has faced pressure to take a public stand against immigration enforcement actions. Target also drew protests and calls for boycotts after it rolled back certain diversity, equity and inclusion initiatives, prompting accusations from critics that the changes betrayed the company’s philanthropic commitments.
Joe Feldman, senior managing director and assistant director of research at Telsey Advisory Group, said shopper boycotts tied to the company’s DEI decisions and its perceived response to ICE enforcement have cut into sales, but he added that Mr. Fiddelke “seems to be willing to make changes to improve its operations.”
Target pointed to signs of improvement in the most recent quarter, including acceleration in sales and traffic late in the period and strength in several merchandise categories. The company said comparable sales were weaker over the full quarter but that the beginning of the current quarter showed a positive trend.
The report arrived amid broader economic uncertainty. While inflation has cooled from its peak, consumer prices have risen about 25 percent over the past five years, and U.S. households continue to feel pressure from higher costs. The company also faces an evolving trade and tariff environment: the White House is seeking a global tariff of 15 percent following a Supreme Court decision that struck down several import taxes imposed over the last year, a development that could affect retailers and suppliers.
For now, Target is balancing short-term operational fixes with brand and merchandising moves intended to reengage shoppers, even as it confronts competition, customer service challenges and the political and economic headwinds that have shadowed much of the retail sector.