TLDR:
- Target reported Q1 earnings with sales declining 3.8% year-over-year, falling short of analyst expectations
- The company lowered its full-year sales forecast, now expecting a low-single-digit decline
- Customer backlash over Target’s rollback of DEI initiatives contributed to sales drop
- Tariff concerns under the Trump administration are creating additional headwinds
- Target created an “Enterprise Acceleration Office” to improve growth and streamline operations
Target reported disappointing first-quarter results on Wednesday, May 21, causing its shares to fall in premarket trading. The retail giant is facing multiple challenges that are hurting its performance.
The Minneapolis-based retailer reported quarterly adjusted earnings per share of $1.30 on revenue that decreased nearly 3% year-over-year to $23.85 billion. Both figures missed analyst expectations of $1.64 per share and $24.34 billion in revenue.
Comparable sales declined by 3.8%, which was worse than the projected 1.68% drop. This decline was driven by fewer customers visiting stores and spending less when they shopped.
Target Corporation $TGT — a 1.87% holding in $SCHD — reported Q1 earnings this morning:
🔻 Non-GAAP EPS of $1.30, missing estimates by $0.35
🔻 Revenue of $23.8B, down 3% YoY and missing by $550M
🔻 Net sales fell 2.8%, driven by a 3.1% decline in merchandise sales
🔺Digital… pic.twitter.com/oTLWvkIWYC— SCHD STAN | Craig (@SCHDETF) May 21, 2025
The company’s GAAP earnings per share of $2.27, which includes gains from litigation settlements, did manage to top estimates. However, this wasn’t enough to offset concerns about overall sales performance.
CEO Brian Cornell acknowledged the shortfall. “While our sales fell short of our expectations, we saw several bright spots in the quarter, including healthy digital growth,” he said.
Cornell added that Target is “not satisfied with current performance” and recognizes opportunities to “deliver faster progress on our roadmap for growth.”
DEI Controversy Impact
One factor hurting Target’s business has been customer backlash following the company’s reversal on diversity, equity and inclusion programs.
On January 24, shortly after Donald Trump’s inauguration, Target announced it was eliminating hiring goals for minority employees. The company also ended an executive committee focused on racial justice and made other changes to its diversity initiatives.
Target framed these changes as part of a new strategy called “Belonging at the Bullseye.” The company said it remained committed to “creating a sense of belonging” while “staying in step with the evolving external landscape.”
This decision angered many supporters of diversity and inclusion policies. Some customers felt blindsided, especially given Target’s previous reputation as a champion for diversity initiatives and LGBTQ rights.
The backlash included a 40-day consumer boycott during Lent led by Rev. Jamal Bryant, a prominent Atlanta-area megachurch pastor. Protesters picketed outside Target headquarters in Minneapolis, and other Black leaders supported the boycott efforts.
Even the daughters of one of Target’s co-founders, Anne and Lucy Dayton, called the company’s actions “a betrayal.”
Tariff Pressures
Adding to Target’s challenges are concerns about tariffs under the Trump administration. The retailer is particularly vulnerable to tariff impacts.
Around 50% of Target’s products are imported from overseas, with an estimated 25% coming from China. This leaves the company in what analyst Steven Shemesh of RBC Capital Markets called a “challenging position.”
Tariffs will force Target to either absorb the added costs, hurting its profit margins, or raise prices for consumers. Cornell had previously mentioned in a March interview with CNBC that Trump’s tariffs on Mexico might force the company to raise prices on fruits and vegetables.
Target faces more pressure from tariffs than some competitors because more than half of its merchandise is discretionary. This puts Target at risk as consumers rein in spending on non-essential items.
The tariff situation comes as other retailers also grapple with similar challenges. Home Depot recently announced plans to keep most prices stable despite tariffs driving up costs, though it may increase prices on select items.
Walmart has stated that Trump’s tariffs are “too high” and indicated it will raise some prices, which prompted criticism from Trump on social media.
In response to these multiple challenges, Target has cut its fiscal 2025 sales forecast and widened its projected profit range. The retailer now expects a low-single-digit sales decrease and adjusted earnings per share of $7.00 to $9.00, excluding the Q1 gains from litigation settlements.
This represents a significant downgrade from last quarter’s forecast, which had projected roughly 1% net sales growth and earnings per share of $8.80 to $9.80.
Target also announced the creation of an “Enterprise Acceleration Office,” to be led by COO Michael Fiddelke. This initiative aims to “improve how functions work together to advance key priorities, ranging from simplifying cross-company processes to using technology and data in new ways to power the team.”
Target’s stock has struggled recently, down about 28% since the start of the year and dropping 4% in premarket trading following the earnings report.
Cornell acknowledged in a recent email to staff that it has been “a tough few months” but emphasized that Target’s culture and commitment to staff have not changed. “I recognize that silence from us has created uncertainty, so I want to be very clear: We are still the Target you know and believe in,” Cornell said.
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