Target sales fall, cuts outlook; announces leadership changes, new office
Target Corp. reported a rough first quarter and slashed its full-year guidance as customers reined in spending amid economic uncertainty. Customer boycotts over the retailer’s pullback on DEI initiatives also put a dent in sales.
“We are not satisfied with recent performance,” Target CEO Brian Cornell said in a statement.
The discounter also announced several leadership changes. Chief strategy and growth officer Christina Hennington, widely seen as a potential successor to Cornell, has been moved into a strategic advisor role and will leave the company in September. Also departing Target is chief legal and compliance officer Amy Tu. (For more leadership changes, see end of article.)
In addition, Target COO Michael Fiddelke has been charged with overseeing a new department — the Enterprise Acceleration Office — which will look into ways to drive greater speed and agility across the company,
"The Enterprise Acceleration Office represents a strategic commitment to operating more nimbly across the organization, creating conditions for speed, adaptability, innovation and resilience,” Cornell stated. “It goes beyond improving efficiency to build operational muscles that clear the way for our talented team to deliver for our guests while accelerating our performance and growth,"
On the earnings call, Cornell said the company faced an “exceptionally challenging environment” in the quarter, with declines in both traffic and sales, most notably in its discretionary categories. He said the company faced several headwinds, including five consecutive months of declining consumer confidence, uncertainty regarding the potential impact of tariffs, and reaction to the changes it announced in January to its DEI initiatives.
“While we believe each of these factors played a role in our first quarter performance, we can’t reliably estimate the impact of each one separately,” Cornell told analysts.
Tariffs
During the earnings call, Cornell noted that the difficulty level around tariffs as “incredibly high,” given the magnitude of the rates that Target is facing and uncertainty about how the rates might evolve. The company is working on different ways to offset the costs.
“We have many levers to use in mitigating the impact of tariffs and price is the very last resort,” he added.
Rick Gomez, chief commercial officer, told analysts the company is working to offset most of the tariffs by diversifying the countries from where it sources its products.
First Quarter
Target’s net income rose to $1.04 billion or $2.27 per share, in the quarter ended May 2, from $942 million, or $2.03 per share, in the year-ago period. Adjusted earnings dropped to $1.30 per share, down from $2.03 per share in the year-ago quarter.
Net sales fell 2.8% to $23.85 billion, missing Street estimates of $24.23 billion. Comparable sales decreased 3.8%, more than expected.
On a positive note, digital comparable sales rose 4.7%. The retailer attributed the rise to more than 35% growth in its Target Circle 360 same-day delivery service and continued growth in its Drive Up service, which now accounts for nearly half of the retailer’s total digital sales.
In other bright spots, Target latest design partnership, Kate Spade for Target, was its strongest limited-time partnership in more than a decade.
In a statement, Cornell, citing the Kate Spade partnership and the company’s digital growth, said that “while these highlights reinforce our confidence in the underlying health of our business, we're not satisfied with current performance and know we have opportunities to deliver faster progress on our roadmap for growth.”
Earlier this month, Target announced it was adding 10,000 new items — with "thousands" priced under $20 — between now and August.
For fiscal 2025, Target cut its guidance range for adjusted earnings from between $8.80 and $9.80 per share to between $7.00 and $9.00 per share. It expects a low-single digit decline in sales, compared to a previous forecast of net sales growth of about 1%.
Leadership Changes
In line with the departure of Hennington, Target announced the following changes across its executive leadership team” to more closely align key capabilities that will support further speed and connection across the organization.”
- Prat Vemana, chief information and product officer, will report directly to Brian Cornell and take on leadership of the Target in India global capability center;
- Jim Lee, CFO, will take on leadership of Target's enterprise strategy and partnerships; and
- Rick Gomez, chief commercial officer, will oversee Target's enterprise insights team.
