Target Stock Sinks After Slashing Outlook, Q1 Earnings Miss – Retailer Warns Of Trump-Era Tariffs And Spending Slowdown

Target (TGT) shares plummeted as much as 6% in pre-market trade on Wednesday after the retailer slashed its full-year sales outlook and missed Wall Street’s expectations on first-quarter earnings. 

The company’s earnings per share (EPS) came in at $1.30, missing analysts’ expectations of $1.65, as per Koyfin data.

Its revenue also missed the market, coming in at $23.85 billion versus the expected $24.34 billion.

Target now expects a low-single-digit decline in sales for the full year, compared to a previous forecast of net sales growth of about 1%. Adjusted EPS is expected to be approximately $7.00 to $9.00, compared to the range of $8.80 to $9.80 it had previously forecasted.

"While our sales fell short of our expectations, we saw several bright spots in the quarter, including healthy digital growth, led by a 36% increase in same-day delivery through Target Circle 360, and our strongest designer collaboration in more than a decade, Kate Spade for Target,” CEO Brian Cornell stated.

According to him, Target’s lackluster growth in the first quarter (Q1) was mostly due to uncertain economic conditions, including President Donald Trump’s tariffs and weaker discretionary spending.

There has also been a backlash against the company’s decision to roll back its key diversity, equity, and inclusion efforts. 

However, Cornell emphasized that Target is committed to doing better, citing that it only gained or held market share in 15 of the 35 merchandise categories it has on offer. 

“We’re not happy with that,” he said during the earnings call. “We’ve got to be growing share in 60, 70, 80% of those categories.”

Target’s comparable sales declined by 3.8% in the quarter compared to the year-ago period. Comparable store sales fell 5.7%, and digital sales grew 4.7%.

Overall, transactions across Target’s stores and website dipped by 2.4%, while the average amount of time customers spent during their online and in-store visits decreased by 1.4%. 

Like Walmart (WMT), Target said it plans to increase prices on some items to help cover tariff-related costs. “We’re constantly adjusting pricing,” Cornell said. “Some are going up, some will be reduced, but that’s an ongoing effort that takes place each and every day.”

However, Chief Commercial Officer Rick Gomez said the company is trying to minimize the impact of duties by negotiating with vendors, reevaluating the merchandise it sells, changing the country that produces it, and adjusting the timing of orders. 

He added that Target sources about half its products from the U.S., noting that the company has spent recent years shifting private-label production to countries beyond China to reduce reliance on a single region.

While cost pressures are expected to continue in the second quarter (Q2), CFO Jim Lee said that the company expects greater relief in the year's second half. 

Target’s stock is down over 27% this year, and has fallen more than 38% over the past 12 months. 

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Read also: Home Depot Tops Q1 Estimates, Reaffirms Forecast, And Says It Won’t Raise Prices – Stock Pops Pre-Market

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