As Tariff Talk Overshadows Target's Upbeat Profit Forecast, Target's Stock Reverses Lower

Target Corp.'s shares fell to a 16-month low during early Tuesday trading, reversing an initial rise following its earnings report. Despite exceeding fourth-quarter expectations and offering an optimistic full-year profit forecast, the retailer’s warning about the negative impact of tariffs on future earnings unsettled investors.

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Target emphasized that ongoing consumer uncertainty, declining February sales, and concerns about tariff-related costs would significantly affect first-quarter profits. The company warned that these factors would put substantial pressure on its earnings early in the year compared to the rest of 2025.

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Analysts surveyed by FactSet had anticipated first-quarter earnings per share (EPS) to rise slightly to $2.05 from $2.03 a year earlier. Initially, Target’s stock climbed 4.4% following the earnings release but quickly reversed, dropping 3.4% in premarket trading. This decline positioned the stock to open at its lowest point since November 14, 2023.

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For the full 2025 fiscal year, Target projects EPS between $8.80 and $9.80, with a midpoint of $9.30—slightly above the average analyst estimate of $9.27, according to FactSet. This outlook was a positive surprise, especially since other major retailers, including Walmart and TJX Companies Inc., had issued profit forecasts below market expectations.

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However, Target’s sales outlook appeared weaker. The company expects net sales to grow by approximately 1% compared to the previous year, while comparable sales—measuring revenue from stores open for at least 13 months—are projected to remain flat. Analysts surveyed by FactSet anticipated net sales of $109.08 billion, implying 2.4% growth, and a 1.6% increase in comparable sales.

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Target reported record-breaking Valentine’s Day sales but described February’s overall performance as "soft." The company attributed this slowdown to unseasonably cold weather across the U.S., which dampened apparel sales, and declining consumer confidence, which reduced spending on non-essential items.

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During the fiscal fourth quarter ending February 1, Target’s earnings per share fell to $2.41 from $2.98 a year ago, although this exceeded the FactSet consensus of $2.26. Net sales dropped 3.1% to $30.92 billion, slightly surpassing analyst expectations of $30.78 billion. Comparable sales rose 1.5%, aligning with FactSet’s projections.

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Chief Financial Officer Jim Lee acknowledged the sales challenges but expressed optimism for an improvement as the weather warms. He noted that upcoming seasonal events like Easter could drive consumer spending. "We expect to see a moderation in this trend as apparel sales respond to warmer weather around the country," Lee said, adding that Target would maintain a cautious outlook moving forward.

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Chief Executive Brian Cornell highlighted strong sales in beauty, apparel, entertainment, sporting goods, and toys as key contributors to the company’s performance. Despite these bright spots, overall net income fell to $1.1 billion from $1.4 billion in the same quarter a year earlier.

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Over the past three months leading up to Monday, Target’s stock declined 7.2%, underperforming its major competitors. In contrast, Walmart’s shares gained 3.3%, while the S&P 500 index fell by 3.9%.

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While Target’s better-than-expected fourth-quarter results and higher-than-forecasted full-year earnings guidance initially buoyed the stock, lingering concerns about tariffs and consumer spending ultimately weighed on investor sentiment. The retailer remains focused on navigating these challenges while positioning itself to capture seasonal sales momentum later in the year.

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