Target Cuts Earnings Guidance as Sales Dip. How the New CEO Plans to Return to Growth.

A customer enters a Target store in Sausalito, California. (Justin Sullivan/Getty Images)

Key Points

• Target cut its fiscal-year earnings guidance after sales declined for the fourth consecutive quarter, with comparable sales down 2.7%.
• Third-quarter adjusted earnings of $1.78 a share exceed expectations, but sales of $25.3 billion fell 1.5% from last year.
• Incoming CEO Michael Fiddelke plans to increase 2026 capital expenditures by 25% to $5 billion to improve stores and merchandising.

Target cut its fiscal-year earnings guidance after its sales declined for a fourth consecutive quarter. Incoming CEO Michael Fiddelke has his work cut out for him as he attempts to turn the struggling business around.

The company’s fiscal third-quarter adjusted earnings of $1.78 a share were above analysts’ expectations for $1.71, according to FactSet.

Target’s sales for the quarter ended Nov. 1 were $25.3 billion, roughly in line with Wall Street estimates, but still 1.5% lower than a year ago. Comparable sales fell as well, sliding 2.7% year over year compared with the 2.1% drop analysts were projecting.

“We are relentless in our pursuit of returning to growth and not satisfied with our current results,” Fiddelke said on a call with journalists Tuesday.

Target shares fell 2% Wednesday morning. The stock has shed 36% this year.

The weak sales trends could continue into the final stretch of the year. Fourth-quarter sales will decline by a low-single digit percentage, Target said. “Choppy” consumer demand trends—exacerbated by concerns about inflation, the federal government shutdown, and a weakening labor market—could carry over from the third quarter.

Target lowered its earnings guidance for the fiscal year to account for the third quarter’s volatility. Fiscal-year adjusted earnings will range from $7 to $8 share, compared with its prior projection of $7 to $9. Unadjusted earnings, or earnings under generally accepted accounting principles, will be between $7.70 and $8.70 a share, down from a past range of $8 to $10.

“I think we’ve learned over time that in times of volatility it’s best for us to be positioned cautiously, so we think that puts us in a prudent place as we look at the balance of the year,” Fiddelke said.

Target announced in August that Fiddelke, the company’s former chief operating officer, would take over from current CEO Brian Cornell in February. But Fiddelke is already trying to put his stamp on the retailer and prove to investors that he’s serious about righting the ship.

Target laid off nearly 2,000 corporate employees in late October in a bid to make the company more efficient, unveiled a new AI-powered gift finder to help customers with holiday shopping, and announced it would be cutting prices on 3,000 daily essentials.

The new CEO unveiled more of his vision for the company, saying he is focused on three priorities: Solidify Target’s merchandising authority, elevate the guest experience in stores and online, and accelerate the use of technology across the business.

“We’ll see more change in the year to come in many categories than we’ve seen in many years, and we think that change is important,” Fiddelke said.

The company announced it plans to increase fiscal 2026 capital expenditures to $5 billion, up 25% from 2025, to improve the store experience and merchandising strategy. Target expects to remodel more stores in 2026, and it is also evolving its shipping strategy to make sure that e-commerce doesn’t weigh on the in-store experience.

Currently, Target fulfills most of its online orders at stores—a tactic that some analysts argue has contributed to in-store inventory shortages, long checkout lines, and messier stores. Executives said they are planning to shift orders away from highly trafficked stores in key markets, rerouting them instead to stores better equipped to handle online orders.

Target also announced it was teaming up with OpenAI’s ChatGPT to allow chatbot users to shop for its items directly through its platform, joining the ranks of other early adopters such as Walmart , Shopify , and Etsy . The function launches next week in beta mode, Target said, and will allow users to purchase multiple items in a single transaction, shop fresh food products, and select their preferred shipping options.

Between the lukewarm financial results and the turnaround efforts touted by executives, the report seemed to have enough to bolster both the bull and the bear case, wrote Christopher Horvers, an analyst at J.P. Morgan. He has a Neutral rating on the stock.

“There were many bears in TGT into the print, and both bulls and bears have something to point to,” he wrote. “We expect the debate to rage on.”

The quarterly sales decline and guidance cut, for instance, is likely to fuel the view that the company still has several tough quarters ahead. Zhihan Ma, who rates the stock Underperform, wrote on Wednesday that she sees “further uncertainties” in the fourth quarter that could weigh on consumer demand, such as increased inflation.

Meanwhile, the bulls will likely point out that Target’s inventory is in good shape, and that its gross margin of 28.2% was in line with expectations, Horvers wrote.

“Although a challenging backdrop is likely to persist into at least early 2026, we remain attracted to TGT’s discounted valuation,” wrote Oppenheimer’s Rupesh Parikh, who has an Outperform rating on the shares. “For longer-term players, we would take advantage of any dips as volatile trading could continue until comps return to positive territory.”

Write to Sabrina Escobar at sabrina.escobar@barrons.com