Target reveals turnaround plan — investing $6B in stores, tech and workers
Target Corp.’s sales slump continued in the fourth quarter amid falling revenue and store traffic even as its adjusted earnings easily topped forecasts.
But the discounter, which is looking to turn things around under new CEO Michael Fiddelke, noted that its sales and traffic accelerated in the last two months of the quarter. Fiddelke, who took the reins on Feb. 1, struck a positive regarding the current quarter.
“Target saw a healthy, positive sales increase in February, serving as an important milestone on our path back to growth this year, and reinforcing my confidence in the momentum we're building and the future we're creating together,” Fiddelke said.
Turnaround Plan
Target detailed its turnaround strategy at its investor day presentation in Minneapolis on Tuesday. Among other things, the retailer is increasing its capital expenditures for its current fiscal year by 25% to about $5 billion to support new stores and ongoing remodels, technology and supply chain investments.
The company plans to open more than 30 stores this year while investing in over 130 planned full-store remodels. (Later this month, Target will open its 2,000th store in Fuquay-Varina, N.C.)
"There will be more newness across the assortment in those stores in the next year than we've seen in any year in the last decade," Fiddelke said.
Target also is planning to make an incremental $1 billion operating investment tin 2026 to deliver a more consistent, elevated experience. This includes more changes to all Target stores than any year in the last decade, the company said, including updated floor plans and enhanced in-store displays to spotlight top items, new styles and key partnerships.
It also includes "hundreds of millions of dollars" in store payroll and training, and increased spending on brand marketing technology, including AI.
“Target’s new chapter is all about fueling growth,” Fiddelke said. “We’ll do so by playing our own game and making changes to delight our guests. These types of changes don’t happen overnight. We have work to do and there are no shortcuts.”
A key part of Target’s strategy is to reclaim its merchandising authority, which has slipped in recent years. To that end, it will create more enhanced and curated store experiences, elevate key categories and more.
Some of the specific plans are outlined below.
•Home: In addition to refreshing its home experience with new items and improved in-store display, Target will relaunch its private-label home brand Threshold this summer. It will also debut shop-in-shops in 200 stores that highlight seasonal looks and on-trend décor.
•Beauty: This fall, the company will launch "Target Beauty Studio," an immersive destination in 600 stores and online. The space will spotlight prestige brands and feature an elevated experience and enhanced service. It will be curated with more than 80 prestige and emerging brands, including 60 that are new to Target. (In August, Target and Ulta Beauty said they had mutually agreed not to renew the Ulta Beauty at Target shop-in-shop partnership when the current agreement concludes in August 2026.)
Baby: Along with new product displays that make it easier to find essentials, the company is expanding the assortment of its Cloud Island owned brand and introducing a "Baby Boutique" experience featuring premium brands in 200 stores. It also is expanding its online "Baby Concierge' service, which offers one-on-one expert guidance, to stores. Target’s total baby assortment will grow by nearly 2,000 new items this year
Food and Beverages: Target ia allocating more space for this category as the company builds new stores and remodels existing locations, and Increasing the amount of newness across the assortment by nearly 50%.
•Women's apparel: Plans call for maximizing in-house design capabilities and trend-tracking technology to bring new styles to consumers faster. Assortments will feature more seasonal styles and frequent partnerships ,driving year-round newness.
On March 7, Target will launch an exclusive, limited-time design collaboration with Gen Z fave Roller Rabbit, an upscale lifestyle brand known for its signature sleepwear, joyful prints and whimsical characters. It's also expanding its collaboration with longtime partner Levi's.
In baby care, Target is expanding its Cloud Island private clothing brand and piloting "baby concierges" helping customers shop.
Target’s plans are in sync with the four priorities that Fiddelke detailed in a letter to customers, employees and business partners that was posted on the chain’s website in early February.
Fourth Quarter
Net income fell to $1.05 billion, or $2.30 per share, for the quarter ended Jan. 31, compared with $1.10 billion, or $2.41 per share, in the year-ago period. Excluding one-time items, including legal settlement gains and business transformation costs, adjusted earnings were $2.44 per share, topping analysts expectations of $2.16 per share.Sales decreased 1.5% to $30.45 billion compared to analysts estimates of $30.46 billion. Comparable sales fell 2.5%, with a 3.9% decline in comparable store sales. Digital comp sales rose 1.9%
Target said that food & beverage, beauty and toys delivered net sales growth in the quarter, with stronger trends in essentials and some compared to the third quarter. Non-merchandise sales grew over 25% with membership revenue more than doubling from a year ago, double-digit growth from Roundel and over 30% growth in marketplace.
Same-day delivery powered by Target Circle 360 grew more than 30%.
Full Year
For the full year ending Jan. 31, sales fell 1.7% to $104.8 billion, its third straight yearly decline. Comparable sales fell 2.6%.
"I'm incredibly proud of how our team navigated through a challenging year in 2025, as they focused on serving our guests while positioning our business for profitable growth in 2026 and beyond," Fiddelke stated in the release. "Our team is firmly focused on writing Target's next chapter of growth, rooted in strengthening our merchandising authority, delivering an elevated and differentiated shopping experience, advancing our use of technology, and continuing to serve and invest in our team and communities."
In 2026, Target expects adjusted earnings in the range of $7.50 to $8.50. Revenue is expected to grow 2%, higher than analysts had forecast.
"This expectation reflects a small increase in comparable sales, with new store and non-merchandise sales contributing more than one percentage point of growth," the company said.
Target ended its fiscal year with 1,995 stores.
