Target Cuts Sales Forecast on Shopper Pullback, Tariff Hit

Target cut its sales forecast due to a sharp pullback in spending, tariffs, boycotts, and consumer confidence, with net sales expected to decline by a low single digit this year.

The company's comparable sales dropped 3.8% in the quarter ended May 3, with consumers spending less per visit, and CEO Brian Cornell attributed the results to weakness in discretionary spending, declining consumer confidence, and uncertainty over tariffs.

Pressure is growing on Target Corp.’s chief executive officer after the retailer cut its sales forecast following a sharp pullback in consumer spending and a hit from tariffs and boycotts.

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

“It’s a great brand. It’s actually a great company. It just looks to us like it needs a new leadership,” said Bill Smead, chief investment officer of Smead Capital Management, which has owned the stock since 2017.

Target’s current management has struggled to navigate through cultural and political landscapes, Smead said, referring to the backlash around its Pride collection in 2023 and boycott calls after the company decided to halt diversity initiatives this year.

It hurts the business to alienate customers, Smead said. He thinks that Target needs to focus more on its strengths and execution during economically challenging times instead of getting caught up in social issues.

In September 2022, Target said that Cornell would stay in his job for about three more years.

The company said Wednesday that it expects net sales to decline by a low single digit this year, down from previous guidance for an increase of about 1%. 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.”

Target shares fell as much as 7.7% in New York trading. Through Tuesday, the company’s stock was down about 27% compared with a 1% increase in the S&P 500.

“The question is how long are investors willing to wait for Target and how much confidence they have in management’s strategy to turn around,” said Sheraz Mian, director of research at Zacks Investment Research.

Target hasn’t been as nimble as competitors in responding to fluctuations in demand. Revenue has declined in five of the past eight quarters. Pressure is growing on Cornell and his team to establish growth strategies, Mian said.

Walmart Inc., Target’s biggest rival, has been investing in low prices, sprucing up its assortment and remodeling stores. It’s also gained market share among wealthier shoppers, who 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 everyday momentum.

“We recognize 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,” Cornell said.

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% of its sales, while competitors such as Walmart 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.

Target announced a series of management changes on Wednesday that it said will improve performance. 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.

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