Target reported earnings before the market opened on Wednesday, beating analyst expectations for Q3 but lowering its full-year profit outlook, signaling that its turnaround plan will take longer amid pricing pressures and weak demand in core categories.
Same-store sales fell 2.7% year-over-year in Q3, marking the third consecutive quarterly decline. Analysts polled by FactSet had expected a 2.1% drop, making the results worse than anticipated.
The weakness stemmed from a 3.8% decline in comparable store sales, with transaction volume (traffic) down 2.2% and average ticket size slipping 0.5%. Digital comparable sales rose 2.4%, driven by a 35% surge in same-day delivery services. E-commerce now accounts for 19.3% of total sales, up from 18.5% a year ago. Total net sales dipped 1.5% to $25.27 billion, missing FactSet’s consensus estimate of $25.33 billion.
Target shares fell 5% in premarket trading, nearing the six-year low of $85.53 set on October 10.
Net profit dropped 21.3% to $859 million, while adjusted EPS declined 3.9% to $1.78, still beating FactSet’s $1.71 forecast.
For Q4, the company expects low single-digit percentage sales declines and revised its full-year adjusted EPS guidance to $7–$8, down from $7–$9 previously.
The stock, down 34.5% year-to-date through Tuesday, traded near mid-2019 lows on Wednesday. By comparison, Walmart gained 12.2% and the S&P 500 rose 12.5% over the same period.
**Incoming CEO: "Not Satisfied" with Performance** Target announced in August that COO Michael Fiddelke will succeed Brian Cornell as CEO on February 1, 2026. That same month, Target and Ulta Beauty agreed to end their "Ulta Beauty at Target" shop-in-shop partnership when the contract expires in August 2026.
Fiddelke, who joined Target as a summer intern in 2003, stated, “We are relentless in our efforts to restore growth and are not satisfied with current performance.” He emphasized strengthening Target’s focus on style and assortment while improving shopping experiences and technology utilization.
He noted “ongoing volatility” in Q3 performance led to the guidance cut but said pinpointing exact demand drivers remains challenging. The incoming CEO told analysts Target won’t wait for macroeconomic improvements, instead pushing store reforms to boost results.
The retailer plans to raise capital expenditures by 25% to $5 billion next year for store remodels, new locations, and enhanced merchandise and shopping experiences—including better service and inventory availability.
Outgoing CEO Cornell, who will remain executive board chair, said the focus is supporting operational changes, acknowledging performance hasn’t met potential but the strategy is sound.
**AI Partnership with OpenAI** Target is leveraging AI to identify trends and improve customer service, partnering with OpenAI to integrate ChatGPT for shopping and personalized recommendations—following Walmart’s lead.
The company reported “shrink” (inventory losses from theft/damage) has normalized to pre-pandemic levels as retailers enhance law enforcement collaboration, inventory tracking, and locked displays.
Last month, Target eliminated 1,800 jobs in its first major restructuring in a decade to streamline operations.
**Inflation Weighs on Consumer Spending** Weak demand has steadily eroded Target’s financials over three years, with inflation-hit shoppers cutting back on discretionary categories like apparel and home goods—key drivers of its sales.
Ahead of earnings, analysts expressed concerns. Morgan Stanley’s Simeon Gutman noted Target “is still struggling to reclaim its leadership in design/style,” with lingering consumer dissatisfaction and low visibility amid its CEO transition.
Bank of America Securities highlighted rising long-term risks, including slowing e-commerce growth, under scaled digital ads/third-party platforms, tariff pressures, pricing challenges, and stiff competition from Walmart and Amazon. They also flagged Target’s higher tariff exposure and leadership/partnership uncertainties.
