Jeremy Bowman, The Motley Fool

Sat, May 24, 2025, 3:25 AM5 min read

• Target missed estimates and cut its guidance in its first-quarter earnings report.

• The business has struggled the past few years and faced several challenges.

• Management's efforts at a turnaround have fallen flat.

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There's no question about it. Target (NYSE: TGT) has been one of the most disappointing retail stocks on the market recently. Over the last three years, the stock price fell 39%, while the S&P 500 has gained 50%.

After another earnings report came in well below both analysts' and the company's expectations, Target seems as far away from a recovery as ever. Comparable sales in the quarter fell 3.8%, which included declines in both traffic and average transaction value. Revenue fell 2.8% in the quarter to $23.85 billion, which missed estimates at $24.35 billion. Gross margin declined from 28.8% to 28.2%. On the bottom line, adjusted earnings per share fell from $2.03 in the quarter a year ago to $1.30. That was well below the consensus at $1.65.

There was no single reason for Target's weak performance. Rather, it was a familiar chorus of headwinds that plagued the stock. Sales in discretionary categories continued with declines in every retail segment except for food and beverage. Home furnishings and decor were particularly weak, falling 8% to $3.2 billion, which may be a reflection of weakness in the housing sector.

Target management noted weakening consumer sentiment and negative effects from a boycott in response to its decision to end its DEI initiatives. That boycott has now ended, but it seems to show evidence that Target is losing touch with its customer base. It's struggling to compete with rivals like Walmart, keep its merchandise fresh, and manage its inventory appropriately.

Looking ahead, the company cut its full-year adjusted earnings per share (EPS) guidance from $8.80 to $9.80 to $7.00 to $9.00. It also lowered its full-year sales guidance, calling for a low-single-digit decline in sales.

Given the underwhelming first-quarter performance and the cut in guidance, Target isn't giving investors much of a reason for hope.

In addition to the challenges the company faces, both with its own issues and a sluggish macro environment, it now has to deal with pressure from tariffs. The company said that it's taking steps to deal with tariffs, including rearranging its supply chain, leveraging its economies of scale, and using other tactics so that it only moves to price increases as a last resort.