Earnings top forecasts as revenue and traffic keep slipping
Target reported another quarter of declining revenue and weaker customer traffic on Tuesday, but shares rose sharply after the retailer posted better-than-expected earnings and outlined plans it says will bring the business back to growth. The company said sales trends improved late in the holiday quarter and turned positive year over year in February, offering an early signal that its multi-year slump may be easing.
For the fiscal fourth quarter, Target reported adjusted earnings per share of $2.44, ahead of the $2.16 estimate in an LSEG analyst survey. Revenue was $30.45 billion versus $30.48 billion expected, a slight miss. Target’s shares closed more than 6% higher on Tuesday.
Quarterly revenue fell about 1.5% from $30.92 billion a year earlier, extending a run of soft top-line performance. Target also said traffic across its stores and digital channels has declined for four consecutive quarters, highlighting the challenge of drawing shoppers back as competition intensifies and consumers remain selective on discretionary spending.
New CEO points to February lift and aims to restore momentum
Michael Fiddelke, who became Target’s chief executive on Feb. 1, said the company started the year with stronger trends than it ended 2025. Speaking to CNBC, he said Target is “out of the gates strong this year,” while cautioning that one month does not establish a sustained trend. He said the February improvement gives him confidence the company is moving back toward growth.
Target said sales and traffic improved in the last two months of the holiday quarter and that February marked a return to year-over-year sales growth. The retailer will use those signs of stabilization as the basis for its pitch to investors that the turnaround is gaining traction. Fiddelke is scheduled to address Wall Street at an investor meeting Tuesday at Target’s headquarters in Minneapolis.
Guidance calls for steady quarterly gains and higher investment
For the current fiscal year, Target expects net sales to rise about 2% from the prior year and said it anticipates sales growth in every quarter. The company said the full-year increase would reflect a small gain in comparable sales, with new stores and nonmerchandise revenue contributing more than one percentage point of growth.
Target forecast full-year adjusted earnings per share of $7.50 to $8.50. The company’s adjusted earnings per share for the most recent full year were $7.57, placing the new guidance range around a similar baseline with room for improvement if the turnaround accelerates.
Management also outlined a higher spending plan. Chief Financial Officer Jim Lee said capital expenditures will total about $5 billion this fiscal year, more than $1 billion above last year. The spending is planned for supply chain upgrades, technology investment, and store improvements. Target expects to open more than 30 new stores and remodel more than 130 stores this fiscal year.
Turnaround hinges on store experience as shoppers stay cautious
Target is trying to reverse several years of disappointing performance tied to a mix of internal missteps and a tougher consumer environment. Annual sales have been roughly flat for four years after a pandemic-era surge. Shares were down nearly 32% over the past three years as of Monday’s close, though they are up nearly 16% so far this year.
Cost actions have been part of the reset. Target cut 1,800 corporate jobs in October in its first major layoff in a decade. It also said last month it would invest more in store labor and cut about 500 roles at distribution centers and regional offices to address complaints about out-of-stocks, long checkout lines, and store conditions, though it did not quantify the added labor spending.
Comparable sales fell 2.5% in the fourth quarter. Store comparable sales dropped 3.9%, while digital comparable sales rose 1.9%. Transactions across stores and digital channels declined 2.9%, while average ticket increased 0.4%. Target said shoppers remain cautious, with higher costs for necessities, influenced by inflation and tariffs, weighing on discretionary categories such as apparel and home goods where Target has traditionally relied on impulse purchases.
Fiddelke said he is focused on improving product and the shopping experience, describing a priority on “incredible product” and “incredible experience.” He also said consumer behavior does not look remarkably different from recent quarters, suggesting the turnaround must come primarily from execution rather than a macro tailwind.
Ads and memberships grow as tariff uncertainty lingers
Target is pushing to diversify revenue beyond traditional merchandise. Nonmerchandise sales rose more than 25% in the fourth quarter, driven by membership revenue more than doubling, double-digit gains in its advertising business Roundel, and more than 30% growth in its third-party marketplace. Same-day deliveries through Target Circle 360 rose more than 30% year over year. The subscription service costs $99 per year or $10.99 per month.
Tariffs remain an open variable for planning. Fiddelke said he could not yet quantify the impact of President Donald Trump’s new 10% global tariff after the Supreme Court struck down broader duties last month, and he did not say whether Target would seek refunds through legal action as some companies have done. He said, “we’ll find out together what the next year holds on the tariff front.”
Target’s recovery is also being judged against peers. Rivals such as Walmart, Costco, and TJX have posted stronger results and have gained share in categories where Target has struggled. The coming quarters will test whether Target’s improved February trend can carry through as it invests more heavily in stores, supply chain, and digital growth.
