Target Cuts Sales Forecast on Shopper Pullback, Tariff Hit

Target Corp. cut its sales forecast following a sharp pullback in spending and a hit from tariffs, boycotts and consumer confidence.

The report sent shares falling and raised questions over chief executive officer Brian Cornell’s ability to execute on plans to recapture growth after two years of choppy results — especially as economic turbulence is growing.

The company now expects net sales to decline by a low single digit this year, down from previous guidance for an increase of about 1 percent. In the quarter ended May 3, comparable sales dropped 3.8 percent, more than analysts had expected, on slower shopper traffic. Consumers also spent less per visit.

“I want to be clear that we’re not satisfied with these results,” Cornell said during a call with reporters. “We’ve got to drive traffic back into our stores and visits to our site.”

He said Target has to move with a greater sense of urgency, attributing the results to weakness in discretionary spending, declining consumer confidence, uncertainty over tariffs and shopper backlash against the company’s decision to halt diversity initiatives. He listed strength in e-commerce as a bright spot.

The Minneapolis-based company has struggled to return to steady growth as consumers spend less on clothes, home goods and other non-necessities following years of rising inflation. Demand for discretionary items has yet to rebound.

While that trend has hit retailers broadly, Target has been more vulnerable than some of its peers. That’s because apparel, home goods and non-consumable items make up about 65 percent of its sales, while competitors such as Walmart Inc. rely on groceries for a larger percentage of revenue. Target has also had trouble with inventory management in recent years amid fluctuations in demand.

“We think it will be more difficult for Target in this environment given tariffs and Walmart’s substantial market share gains,” said Jefferies analyst Corey Tarlowe.

In a sign that pressure to improve performance is rising, Target announced a series of management reshuffles and said its chief strategy and growth officer Christina Hennington, a Target veteran of more than 20 years and once seen as a potential successor to Cornell, will leave the company.

Chief operating officer Michael Fiddelke will lead a newly formed group called the “multiyear acceleration office,” aimed at positioning Target “to deliver faster progress on its roadmap for growth.”

Target shares were down 3 percent in premarket trading in New York. So far this year, the company’s stock is down 27 percent compared to a 1 percent increase in the S&P 500.

Pressure on CEO

The worse the economic turbulence gets, the more pressure it puts on Cornell — a CEO once seen as a retail wunderkind.

Following stints at Walmart Inc. and PepsiCo Inc., Cornell joined as the top executive of Target over a decade ago and streamlined the retailer’s operations. He led the company through the pandemic and beefed up digital operations, but Target hasn’t been able to generate substantive growth since then.

Target has trailed Walmart, which has been investing in low prices, sprucing up assortment and remodelling stores. It’s also gained market share among wealthier shoppers that used to be Target’s sweet spot.

Target executives acknowledged that they’re not hitting the mark. Sales jumps during major holidays and limited-time design collaborations help fuel growth and bring people into stores, but the company isn’t seeing that same kind of momentum on a more regular basis.

“Even in a challenging environment where consumers are on a budget, they’re not cutting back on discretionary spending when it’s that big seasonal moment like Valentine’s Day or Easter,” Cornell said on the call. “But we recognise that we’ve got to make sure each and every day, we deliver the right products, the right assortment, the right value that brings guests into our stores and our digital sites.”

Emarketer analyst Sky Canaves warned that “the company’s outperformance during holiday periods won’t be enough to carry it through the rest of the year.”

Diversity Boycotts

The big-box chain has also faced boycotts by some shoppers following a pullback from diversity initiatives earlier this year. While Target is one of many companies that have dialled back such programs following pressure from the Trump administration, the company has experienced a bigger backlash than others.

That’s due to the brand’s efforts in past years to promote diversity as central to its corporate identity. This ranged from partnering with Black-owned suppliers to offering a wider range of apparel sizes.

Tariffs represent the latest obstacle. Higher levies on imported goods are expected to raise prices of goods in the near term, resulting in a decline in consumer sentiment and cautious shoppers. In remarks to reporters, executives signalled that Target’s current sales outlook is conservative, but challenges are expected to persist in the coming months.

The company is adjusting prices in response to the volatile environment, executives said, without directly linking changes to tariffs — a departure from the company’s more direct comments about the levies’ impact in March.

Home Depot Inc. on Tuesday also struck a more conservative tone about tariffs after Walmart last week said that price increases are coming. Those remarks drew the ire of Trump over the weekend.

Target executives said they’re negotiating with suppliers while examining their inventory assortment and changing some sourcing countries.

Getting Back to Growth

Despite general weakness, consumers are still spending when they find new, trendy products at good value, said Rick Gomez, Target’s chief commercial officer. The company’s recent collaboration with Kate Spade was its biggest sales success in years for designer partnerships, while holidays such as Valentine’s Day and Easter outperformed non-holiday days.

Target lost market share in 20 out of 35 categories during the last quarter, Gomez said. It gained or held market share in areas like essentials, produce, flowers and women’s swimwear.

Target will focus on growing share in more areas this year, executives said, as it looks to offer new items and key products at a good value. The company has sharpened its focus on deals and plans to offer more than 10,000 new items this summer, with some costing as little as $1.

By Jaewon Kang

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