Struggling to Keep Up With Rivals
Target (NYSE: TGT) once again reported weaker-than-expected results, showing ongoing challenges in adapting to today’s price-conscious shoppers. While second-quarter earnings were slightly above forecasts thanks to cost-cutting measures, the retailer is still battling declining store sales, rising tariffs, and intense competition from Walmart (NYSE: WMT).
Second-Quarter Highlights
- Net Sales: Down 0.9% year-over-year to $25.2 billion (vs. $24.53 billion estimate).
- Comparable Sales: Fell 1.9%, led by a 3.2% decline in physical stores, but offset by a 4.3% rise in digital sales.
- Gross Margin: Slipped to 29% from 30% last year, though still above Wall Street’s 28.08% forecast.
- Earnings Per Share (EPS): Dropped 20.2% year-over-year to $2.05, just ahead of the $2.01 estimate.
- Inventory: Up 2.2% (vs. 3.44% expected).
- Customer Traffic: Transactions fell 1.3%, with the average ticket size slipping 0.6%.
Despite the declines, Target reaffirmed its full-year EPS outlook of $7–$9, in line with its May guidance but well below its original 2025 forecast of $8.80–$9.80. Comparable sales are still expected to dip by a low single-digit percentage.
Market Reaction
Before earnings, Target stock was already down 23% year-to-date in 2025, compared to a 13% gain for Walmart. After the report, shares plunged 9% in premarket trading, reflecting investor concerns about weak consumer demand and continued market-share erosion.
Leadership Transition Ahead
In a major leadership shift, Target announced that Michael Fiddelke, the company’s current COO and longtime executive, will become CEO on February 1, 2026. He will replace Brian Cornell, who has led Target since 2014 and will transition into the role of executive chair.
Fiddelke joined Target in 2003 as an intern and worked his way up through finance and operations. His appointment comes at a critical moment for the retailer, as it tries to stabilize sales and regain consumer trust.
