Target cuts guidance amid sales decline in Q1
Target CEO Brian Cornell said sales fell short of the company’s expectations but there were several "bright spots" in the period.
"In the first quarter, our team navigated a highly challenging environment and focused on delivering the outstanding assortment, experience and value guests expect from Target," Cornell said.
Cornell continued, "While our sales fell short of our expectations, we saw several bright spots in the quarter, including healthy digital growth, led by a 36% increase in same-day delivery through Target Circle 360, and our strongest designer collaboration in more than a decade, kate spade for Target.”
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Cornell added, “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. This morning, we announced the establishment of a multi-year acceleration office, led by Michael Fiddelke, along with several leadership changes. These steps forward are intended to build more speed and agility into how we operate, and position key capabilities to drive long-term profitable growth. With these changes and the financial strength to continue investing in our business, I'm confident we can emerge an even stronger company over time."
Target’s first quarter net sales were $23.8 billion, compared with $24.5 billion in 2024.
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The company also reported first quarter GAAP earnings per share of $2.27 and adjusted earnings per share of $1.30 compared with GAAP and adjusted EPS of $2.03 in 2024
The retailers’ comparable sales decreased 3.8% in the first quarter, reflecting a comparable store sales decline of 5.7% and comparable digital sales growth of 4.7%. Net sales of $23.8 billion in the first quarter were 2.8% lower than last year, reflecting a merchandise sales decrease of 3.1% and a 13.5% increase in other revenue. First quarter operating income of $1.5 billion was 13.6% higher than last year, Target said.
Target’s first quarter operating income margin rate, which includes the one-time benefit of the settlement of credit card interchange fee litigation, was 6.2% in 2025, compared with 5.3% in 2024. Excluding the litigation settlement gains, operating income margin rate was 3.7% in 2025.
The retailer said its first quarter gross margin rate was 28.2%, compared with 28.8% in 2024, reflecting the net impact of merchandising activities, including higher markdown rates, as well as digital fulfillment and supply chain costs due to increased digital sales penetration and new supply chain facilities coming online. These pressures were partially offset by the benefit of lower inventory shrink, Target said.
Among Target's Q1 highlights:
- Digital comparable sales grew 4.7% reflecting more than 35% growth in same-day delivery powered by Target Circle 360 and continued growth in Drive Up.
- Key seasonal moments outperformed non-holiday periods throughout the quarter.
- The company's limited-time partnership with kate spade was the strongest designer collaboration in the last decade.
- First quarter SG&A expense and operating Income included $593 million in pre-tax gains from the settlement of credit card interchange fee litigation.
For fiscal 2025, the company said it now expects a low-single digit decline in sales, and GAAP EPS of $8 to $10. Adjusted EPS, which excludes the gains from the litigation settlements in the first quarter, is expected to be approximately $7 to $9.
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The company also shared that it has established an acceleration office led by Michael Fiddelke, with the purpose of enabling faster decisions and execution of its core strategic initiatives in support of a return to growth.
"The Enterprise Acceleration Office represents a strategic commitment to operating more nimbly across the organization, creating conditions for speed, adaptability, innovation and resilience. 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," Cornell said. "This effort is a natural extension of our roadmap for growth, and the work will benefit greatly from Michael's leadership and his track record of simplifying complexity and championing cross-functional collaboration."
In addition to establishing the Enterprise Acceleration Office, the company shared a number of changes across its executive leadership team to 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, chief financial officer, will take on leadership of Target's enterprise strategy and partnerships.
- Rick Gomez, chief commercial officer, will oversee Target's enterprise insights team.
- With these changes, Christina Hennington, chief strategy and growth officer, will depart Target and move into a strategic advisor role through Sept. 7, 2025.
"During her time with Target, Christina applied her merchant's eye and strategic mindset to grow our multicategory commercial business by billions of dollars, and we are grateful for her leadership, vision and impact," Cornell said.
Target also announced the departure of Amy Tu, chief legal and compliance officer. In the near term, Melissa Kremer, chief human resources officer, will oversee the function while the company conducts a comprehensive external search.