In This Article:
Target (TGT, Financials) lowered its full-year outlook after missing Wall Street expectations in the fiscal first quarter, citing weak discretionary spending, tariff uncertainty, and fallout from changes to its diversity, equity and inclusion efforts.
Target's first-quarter results reflect continued struggles to recapture market share and momentum. The company reported a 2.4% decline in transactions and a 1.4% drop in average customer spending. While digital sales rose 4.7%, it wasn't enough to offset broader weakness in its core discretionary categories.
The Minneapolis-based retailer now expects a low-single-digit decline in annual sales, versus a prior forecast for roughly 1% growth. Adjusted full-year earnings per share are projected between $7 and $9, down from an earlier range of $8.80 to $9.80.
CEO Brian Cornell attributed the results to macroeconomic headwinds and internal challenges. He noted that Target held or gained market share in only 15 of 35 categories tracked internally. We're not happy with that, Cornell said.
In response, Target launched an "Enterprise Acceleration Office" under COO Michael Fiddelke to streamline operations and reignite growth. The company also announced executive departures, including its chief strategy and legal officers.
About 30% of Target's private-label merchandise now comes from China, down from 60% in 2017, as the company adjusts its supply chain to reduce tariff risk. Pricing remains in flux, with Cornell saying any increases tied to tariffs would be a last resort.
Despite the challenges, Target saw a 36% year-over-year increase in same-day deliveries through its Circle 360 membership, and strong demand for its limited-edition Kate Spade collection.
Investors will be watching how Target manages cost pressures and whether its turnaround plans gain traction in the second half of the year.
This article first appeared on GuruFocus.