MINNEAPOLIS — Target On Tuesday, the retailer posted another quarter of declines in revenue and store traffic, although its shares rose as the retailer’s profits beat estimates and it said it was ready to end its sales decline.
The big-box retailer, which is in the midst of a turnaround effort, said sales and traffic trends accelerated in the final two months of the holiday quarter. Then, sales turned positive year over year in February, the start of the current quarter.
Speaking to CNBC on Tuesday, Target CEO Michael Fiddelke said the company was “strong out of the gate this year.” While noting that one month of growth “does not constitute a trend,” he said the increase in sales in February gives him “confidence” that the company is returning to growth.
For the current fiscal year, Target expects net sales to increase about 2% from the previous year and predicts that this metric will increase in each quarter of the year. This growth in net sales for the year would reflect a slight increase in comparable sales, the retailer said. The company added that its new stores and non-merchandise sales, such as advertising and memberships, would contribute more than a percentage point to growth.
Sign at the entrance to a Target store in Venice, Florida.
Erik McGregor | Light flare | Getty Images
Target said it expects full-year adjusted earnings per share to be between $7.50 and $8.50. Its adjusted earnings per share for the most recent full year was $7.57.
Fiddelke, who rose to the highest position in the company on Feb. 1, will try to persuade Wall Street that the retailer is boosting sales at an investor meeting Tuesday morning at Target’s Minneapolis headquarters.
Here’s what the company reported for the fiscal fourth quarter compared to Wall Street estimates, according to a survey of analysts by LSEG:
Earnings per share: $2.44 adjusted versus $2.16 expectedIncome: $30.45 billion versus $30.48 billion expectedThe big-box retailer missed Wall Street’s expectations for fourth-quarter revenue, even though analysts were already forecasting weaker sales. Its quarterly turnover fell about 1.5% from $30.92 billion a year ago.
For four straight quarters, customer traffic in stores and on the company’s website has declined.
Target’s net income for the three months ended Jan. 31 fell to $1.05 billion, or $2.30 per share, from $1.10 billion, or $2.41 per share. a year earlier. Excluding one-time items, including gains related to legal settlements and business transformation costs, Target’s adjusted earnings per share were $2.44.
Target tries to end several years of disappointing results driven by a mix of corporate missteps and economic factors. Its annual turnover has remained roughly stable for four years, following a significant increase in annual turnover during the Covid pandemic.
The company’s shares have fallen nearly 32% over the past three years, as of Monday’s close, although they are up nearly 16% so far this year.
As it attempts to turn its business around, Target eliminate 1,800 jobs in companies in October, marking its first major layoff in a decade.
Some of Target customers told CNBC they shop elsewhere after noticing changes like more neglected stores and dull merchandise, or after objecting to the company’s social stances, like its pushback on major diversity, equity and inclusion initiatives. The company recognized negative reactions to its DEI decision hurt sales and led to losses of market share to competitors.
Target’s challenge of attracting shoppers persists. Comparable sales, an industry measure that takes into account short-term factors such as store openings and closings and also called same-store sales, declined 2.5% year over year in the fourth quarter. This reflects a comparable sales decline of 3.9% at Target stores and an increase of 1.9% on Target’s website and app.
Transactions at Target’s stores and website fell 2.9% year over year. The average amount spent by customers on these transactions increased 0.4% year over year.
In an interview with CNBC at Target headquarters this fall, Fiddelke said he would prioritize restoring the company’s reputation for style and design, improving the customer experience and using technology to improve its performance.
He echoed those key goals on Tuesday, telling CNBC that the company wants to prioritize “incredible products and products.” [an] incredible experience.”
Last month, Target also announced that it invest more in store workforce and eliminate around 500 positions in 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 it would spend much more.
“We know we need to equip our teams to have the resources they need to deliver an incredible in-store experience,” he told CNBC on Tuesday.
Target is known for selling trend-driven clothing, home goods, seasonal items, and other discretionary merchandise that customers often buy on impulse as they browse the aisles on a “Target run.” Yet rising prices for food, utilities and other necessities, fueled by inflation and tariffs, have dampened U.S. consumers’ willingness to buy items that aren’t on their shopping lists.
Fiddelke told CNBC that he doesn’t see anything “notably different” in buyer behavior compared to recent quarters.
He also did not say how he expects President Donald Trump’s new 10% global tariffs to affect the company after the Supreme Court struck down broader duties last month. He told CNBC “we’ll find out together what next year has in store for us on the pricing front.” Fiddelke also did not say whether Target would take legal action to obtain a refund of the customs duties, as companies like FedEx and Costco have done so.
Target’s results in recent years are at odds with those of retail rivals like Walmart, Costco and TJ Maxx parent company TJX, which have posted better sales results, attracted shoppers based on income and seen growth in categories like clothing and home goods, areas in which Target has struggled.
In addition to offering products such as groceries, clothing and home goods, Target is trying to sell more ads and subscriptions to its customers. The company’s non-merchant sales jumped more than 25% in the fourth quarter, driven by membership revenue that more than doubled from a year ago, double-digit percentage gains in its advertising business, Roundel, and more than 30% growth in its third-party marketplace.
Same-day deliveries through Target Circle 360 increased more than 30% year over year. The subscription service costs $99 per year or $10.99 per month.
