Target says it’s on track to end its sales slump after another lackluster quarter

MINNEAPOLIS — Target on Tuesday posted another quarter of falling revenue and customer traffic at its stores, though its shares rose as the retailer’s earnings beat estimates and it said it is poised to end its sales slump.

The big-box retailer, which is in the middle of a turnaround effort, said sales and traffic trends picked up in the last two months of the holiday quarter. Then sales turned positive year over year in February, which is the beginning of the current quarter.

Speaking to CNBC on Tuesday, Target CEO Michael Fiddelke said the company is “out of the gates strong this year.” While he noted that one month of growth “does not make a trend,” he said the February sales increase gives him “confidence” the company is moving back to growth.

For the current fiscal year, Target expects net sales to rise about 2% compared with the prior year and anticipates that metric will grow in every quarter of the year. That net sales growth for the year would reflect a small increase in comparable sales, the retailer said. The company added that its new stores and nonmerchandise sales, such as advertising and membership, would contribute more than 1 percentage point of growth.

Target said it expects full-year adjusted earnings per share to range from $7.50 to $8.50. Its adjusted earnings per share for the most recent full year were $7.57.

Fiddelke, who stepped into the company’s top role on Feb. 1, will try to persuade Wall Street that the retailer is gaining sales momentum at an investor meeting on Tuesday morning at Target’s Minneapolis headquarters. 

Here’s what the company reported for the fiscal fourth quarter compared with Wall Street’s estimates, according to a survey of analysts by LSEG:

• Earnings per share: $2.44 adjusted vs. $2.16 expected
• Revenue: $30.45 billion vs. $30.48 billion expected

The big-box retailer missed Wall Street’s revenue expectations for the fourth quarter, despite analysts already anticipating weaker sales. Its quarterly revenue dropped about 1.5% from $30.92 billion in the year-ago period. 

For four quarters in a row, customer traffic across the company’s stores and website has fallen. 

Target’s net income for the three-month period that ended Jan. 31 fell to $1.05 billion, or $2.30 per share, compared with $1.10 billion, or $2.41 per share, a year earlier. Excluding one-time items, including legal settlement gains and business transformation costs, Target’s adjusted earnings per share were $2.44.

Target is trying to end several years of disappointing results driven by a mix of company missteps and economic factors. Its annual sales have been roughly flat for four years, after a significant jump in annual revenue during the Covid pandemic.

Shares of the company have dropped by nearly 32% over the past three years, as of Monday’s close, though they have risen nearly 16% so far this year.

As it tries to turn its business around, Target cut 1,800 corporate jobs in October, marking its first major layoff in a decade.

Some of Target’s customers told CNBC they are shopping elsewhere after noticing changes like sloppier stores and lackluster merchandise, or objecting to the company’s social stances, like its rollback of major diversity, equity, inclusion initiatives. The company acknowledged backlash to its DEI decision had hurt sales and led to market share losses to competitors.  

Target’s challenge with attracting shoppers has persisted. Comparable sales, an industry metric that takes out short-term factors like store openings and closures and is also called same-store sales, decreased 2.5% year over year in the fourth quarter. That reflected a 3.9% comparable sales decline at Target’s stores and a 1.9% increase across Target’s website and app.

Transactions across Target’s stores and website fell by 2.9% year over year. The average amount that customers spent during those transactions grew 0.4% year over year.

In an interview with CNBC in the fall at Target’s headquarters, Fiddelke said he would prioritize regaining the company’s reputation for style and design, improving the customer experience, and using technology to boost its performance.

He echoed those key goals on Tuesday, telling CNBC the company wants to prioritize “incredible product and [an] incredible experience.”

Last month, Target also announced it would invest more in store labor and cut about 500 roles at distribution centers and regional offices to try to address shoppers’ concerns about out-of-stocks, long checkout lines and other store conditions. However, the company declined to say much more it would spend. 

“We know we have to equip our teams to have the resources they need to deliver an incredible store experience,” he told CNBC on Tuesday.

Target is known for selling clothing, home goods, seasonal items and other trend-driven discretionary merchandise that customers often buy on impulse when browsing the aisles on a “Target run.” Yet higher prices of food, utilities and other necessities, fueled by inflation and tariffs, has dampened U.S. consumers’ willingness to buy items that aren’t on the shopping list.

Fiddelke told CNBC he does not see anything “remarkably different” about shopper behavior now relative to recent quarters.

He also did not say how he expects President Donald Trump’s new 10% global tariff to affect the company after the Supreme Court struck down broader duties last month. He told CNBC “we’ll find out together what the next year holds on the tariff front.” Fiddelke also did not say whether Target would take legal action to get tariff refunds, as companies like FedEx and Costco did.

Target’s results in recent years have been at odds with those of retail rivals like Walmart, Costco and T.J. Maxx’s parent, TJX, which have posted stronger sales results, attracted shoppers across incomes, and seen growth in categories like apparel and home goods, areas where Target has struggled.

Along with offering products like groceries, clothing, and home goods, Target is trying to sell more advertisements and membership subscriptions to customers. The company’s nonmerchandise sales jumped more than 25% in the fourth quarter, driven by membership revenue more than doubling from a year ago, double-digit percentage gains in its ads business, Roundel, and over 30% growth in its third-party marketplace. 

Same-day deliveries through Target Circle 360 grew more than 30% year over year. The subscription service costs $99 per year or $10.99 on a monthly basis.