Target Stock Earnings: Q3 Slump & Turnaround Strategy

Target Faces Headwinds as Q3 Earnings Reveal Persistent Sales Decline

Target Corporation (TGT) delivered a challenging third-quarter report, underscoring the ongoing struggles of the retail giant. Despite beating earnings per share expectations, the company reported a decline in both sales and profits, forcing it to cut its full-year profit outlook as shoppers continue to prioritize value and essentials.

Key Q3 Financial Results & Guidance Cuts

For the quarter ending November 1, 2025, Target reported:

• Adjusted Earnings Per Share: $1.78 (vs. $1.72 expected)
• Revenue: $25.27 billion (vs. $25.32 billion expected)
• Comparable Sales: Declined 2.7% (third consecutive quarter of decline)
• Net Income: Dropped nearly 19% year-over-year to $689 million

The retailer trimmed its full-year adjusted earnings per share guidance to a range of $7 to $8, down from the previous high-end estimate of $9. This reflects a challenging operating environment where Target is losing ground to competitors like Walmart, Amazon, and TJ Maxx.

Mounting Challenges: Sales Stagnation & Shopper Behavior

Target's sales have been stagnant for roughly four years, a significant issue highlighted in the earnings report. The company attributes part of this to a shift in consumer spending habits, with shoppers stretching budgets and prioritizing essentials and value-driven purchases over discretionary items like clothing and home decorations.

"Customers are making trade-offs," said Chief Commercial Officer Rick Gomez. "We saw stronger sales in food, beauty, and essentials, but weaker performance in categories like decor during Halloween." Traffic dropped 2.2%, and the average transaction amount fell by 0.5%, indicating both fewer visits and reduced spending per visit.

Furthermore, Target faced backlash earlier in the year after scaling back some diversity, equity, and inclusion (DEI) programs, which the company acknowledged negatively impacted sales.

Aggressive Turnaround Plan Led by Incoming CEO

With long-time CEO Brian Cornell stepping down effective February 1, 2026, Target is placing its hopes on incoming CEO Michael Fiddelke, the current Chief Operating Officer. Fiddelke has outlined a three-pronged strategy to revitalize the business:

1. Strengthen Merchandise Assortment: Regaining the "cheap chic" appeal that once defined Target, including sending designers for inspiration to unique locations.
2. Enhance Shopping Experience: Improving consistency between online and in-store interactions, including addressing customer concerns about "sloppier stores" and inventory availability.
3. Accelerate Technology Adoption: Leveraging AI for better decision-making and customer engagement.

A cornerstone of this plan is a massive investment. Target announced it will increase capital expenditures by 25% to $5 billion in 2026 for store remodels and merchandise refreshes. This includes an additional $1 billion committed specifically to "major assortment categories" and store improvements.

Target is also doubling down on technology. The company announced a partnership with OpenAI, launching an experience within ChatGPT next week. This will allow customers to browse and purchase items, including groceries, directly through the chat interface, with options for drive-up or curbside pickup. This follows a quieter AI push internally, including tools like "Target Trend Brain" to identify popular styles.

Holiday Outlook & Value Focus

Heading into the crucial holiday season, Target expects sales to decline by a low single-digit percentage in Q4. To attract frugal shoppers, the retailer has already cut prices on 3,000 everyday food and household products. It's also emphasizing value in its holiday assortment, featuring ornaments starting at $1, candles at $5, and throw blankets at $10. Additionally, Target is offering unique items, with over half of its 20,000 new holiday products exclusive to the chain and a collaboration with Starbucks for a limited-edition drink.

Investor Sentiment & Path Forward

"Target is really struggling and does not seem to be able to climb out of the hole it has dug itself into."

Analysts remain cautious. Shares have tumbled roughly 35% in 2025 and are down about 67% from their 2021 peak. While acknowledging some "volatility" in the recent quarter, Fiddelke stated the focus is on "making the right investments and the right decisions to get Target back to growth as quickly as possible." Success will hinge on executing its turnaround plan effectively, regaining customer trust, and demonstrating it can compete fiercely on value in an increasingly challenging retail landscape.