Target Corporation (NYSE: TGT) shares remained red on Friday. The stock price has fallen 23% over the past three months. The company faced a challenging environment in the first quarter of 2025, tackling existing headwinds, eroding top and bottom line performance.
Retailers don’t expect these headwinds to wander in the short term, and have decided to lower their outlook for the year. However, there are certain growth areas where the company is focusing on as it moves through this challenging landscape.
Severe conditions will damage Q1 results
Target faced unexpectedly challenging environments in the first quarter of 2025, causing a blow to traffic and sales. The brunt of this pressure was borne by a discretionary category. Discretionary categories have been waned for some time by high inflation, which forced customers to concentrate more on essential categories. In addition to existing challenges, the company faced new headwinds during the quarter as consumer confidence, tariff-related uncertainty and negative reactions to certain changes unfolded at the beginning of the year.
These headwinds reduced target sales and profits in the first quarter. Net sales fell 2.8% year-on-year to $23.8 billion. Equivalent sales fell 3.8%, while comparable store sales were 5.7%. The decline in COMPS was caused by a 2.4% decrease in traffic and a 1.4% decrease in average tickets. Compared to last year, earnings per share adjustments fell 36% to $1.30.
Looking forward to the rest of the year, Target hopes that its top line pressure will continue in the short term.
Focus on values
When navigating this period of volatility, the target is particularly focused on providing value to its customers for their purchases. Consumers are keeping their purchases in mind and are trying to save as much as they can on their budget. Still, they are willing to buy discretionary items if they can find them in good quality and value.
The first quarter received the top line of targets gained from momentum during Valentine’s Day and Easter. As part of that value proposition, during the summer season, retailers are offering over 10,000 new items starting from $1. The company continues to offer items at the Bullseye playgrounds in price ranges of $1, $3 and $5, and plans to expand this assortment to include beauty items, snacks and drinks.
Target delivers value to its customers through the Target Plus Marketplace and Target Circle Loyalty programs. In Q1, Target Plus GMV has increased by more than 20%, and the company aims to increase its GMV to $5 billion by 2030. TGT has achieved a positive response to Target Circle Week, with a 36% growth with same-day delivery powered by Target Circle 360.
Other bright spots in the quarter saw comparable digital sales and inventory contraction progress increase by 4.7%, easing from extreme levels over the past few years. Target is committed to minimizing tariff headwinds through a variety of strategies, including negotiations with vendors, reassessing assortment, and changing the country of production.
I lowered my outlook
Target forecasts headwinds from sales pressures to continue in the second quarter of 2025, tariff impacts and some additional costs. The company lowers its full-year guidance for 2025 and is now forecasting a decline in sales growth of around 1%. The adjusted EPS is expected to be between $7.00 and $9.00 against the previous range of $8.80-$9.80.
