Target’s (TGT) latest quarter shows early progress—but a long road remains.
Target’s newest results paint a mixed picture as the retailer continues to struggle with slowing sales, shifting consumer behavior, and a cautious outlook for the holidays. With incoming CEO Michael Fiddelke preparing major changes, investors are watching closely to see if the company can regain momentum.
Key Points
- Sales dropped for the fourth straight quarter, and fiscal-year earnings guidance was cut.
- New CEO Michael Fiddelke plans a 25% increase in 2026 capital spending to improve stores and merchandising.
- A new partnership with ChatGPT highlights Target’s push into AI as it works to stabilize traffic and customer engagement.
A Fourth Straight Quarter of Declining Sales
Target reported adjusted earnings of $1.78 per share—better than expected—but that bright spot came alongside another quarter of shrinking revenue. Sales totaled $25.3 billion, down 1.5% from a year ago. Comparable sales slid 2.7%, marking the fourth consecutive quarterly decline.
Management signaled that weakness will likely continue. The retailer expects fourth-quarter sales to fall by a low-single-digit percentage as consumers remain cautious about discretionary spending, pressured by inflation, rising debt, and a softening job market.
Target cut its full-year forecast as a result. Adjusted earnings are now projected at $7–$8 per share, lower than previously expected. Executives described the environment as “volatile” and said staying conservative is the “prudent” choice.
How Will Target’s New CEO Drive Change?
Michael Fiddelke, who officially becomes CEO in February, is already reshaping the company. His strategy centers on three priorities: strengthening merchandising authority, elevating the in-store and online experience, and accelerating technology adoption.
To support this, Target plans to boost capital expenditures to $5 billion in fiscal 2026—a 25% jump. The investment will fund store remodels, improved digital tools, and changes to Target’s shipping strategy so online orders no longer overwhelm high-traffic locations.
The retailer has also cut nearly 2,000 corporate roles to streamline operations and improve agility, positioning itself better for shifting consumer trends.
Can AI-Powered Shopping Help Reverse Traffic Declines?
Target is testing a first-of-its-kind partnership with ChatGPT. Shoppers will be able to tag the retailer in natural-language conversations and add recommended items to a digital cart before completing purchases in the Target app.
The company sees this as an opportunity to reach younger consumers, especially as more shoppers turn to AI instead of traditional search engines. Early data shows that 15% of Gen Z and millennial shoppers plan to use AI for gift ideas this holiday season.
Executives believe AI can help restore the “Tar-jay” shopping experience by creating more personalized and immersive experiences, including store maps and budgeting tools.
What It Means for Investors
For investors who analyze stocks seeking companies that are good to invest in, the picture is mixed. On one hand, Target’s earnings beat shows the retailer is controlling costs and managing margins effectively. Inventories are healthy, and gross margins held steady at 28.2% despite discounting.
But the company news also reflects broader challenges. Traffic remains weak, discretionary categories are soft, and the core customer is becoming more selective. With the stock down sharply this year, many traders are waiting for signs of stabilization before considering it among the best stocks to buy now.
The coming quarters may bring continued choppiness, but Target’s investment cycle—store upgrades, operational changes, and AI integrations—could set up a longer-term recovery.
Conclusion
Target is working aggressively to regain momentum, but the turnaround won’t be immediate. With declining sales, a cautious holiday outlook, and a changing consumer landscape, the retailer faces a challenging short-term path. Still, the upcoming CEO transition, fresh investment plans, and new AI-driven initiatives offer potential upside over the longer run.
FAQs
Is Target’s earnings outlook improving?
Not in the short term. The company lowered its fiscal-year guidance due to weakening sales and a cautious holiday forecast.
Why are Target’s sales declining?
Consumers are spending less on discretionary items as inflation, debt, and job uncertainty weigh on confidence.
How is the new CEO planning to revive growth?
Michael Fiddelke is increasing capital spending, remodeling stores, improving merchandising, and expanding technology investments.
Will the ChatGPT partnership help Target?
It may help engagement with younger shoppers and create easier product discovery, but it is still in beta.
Is Target still considered a good long-term investment?
It depends on risk tolerance. Long-term investments in stores and technology may pay off, but near-term performance is likely to stay uneven.
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