Target's same-store sales have declined for three consecutive quarters, its full-year guidance was lowered, and the stock price has fallen back to 2019 levels.

Target released its earnings report before the market opened on Wednesday. Although third-quarter results exceeded analysts’ expectations, the company lowered its full-year profit outlook, suggesting that its business turnaround plan will take longer as it faces pressure from price cuts and weak demand in core categories.

According to the report, Target’s same-store sales fell 2.7% year-over-year in the third quarter, marking the third consecutive quarterly decline. Analysts’ average forecast compiled by FactSet expected a 2.1% drop, but the actual results were worse than expected.

The company stated that the weak performance mainly came from a 3.8% drop in comparable store sales, with transaction volume (customer traffic) down 2.2% and average transaction value down 0.5%. Meanwhile, comparable digital sales rose 2.4%, same-day delivery business surged 35%, and digital sales’ share of total sales increased from 18.5% a year earlier to 19.3%. Total net sales fell 1.5% to $25.27 billion, below FactSet’s consensus estimate of $25.33 billion.

Target’s share price fell 5% pre-market, nearing the six-year low closing price of $85.53 set on October 10.

Meanwhile, net profit dropped 21.3% to $859 million; excluding nonrecurring items, adjusted earnings per share fell 3.9% to $1.78, but still exceeded FactSet’s forecast of $1.71.

Looking ahead, the company continues to expect low single-digit percentage declines in fourth-quarter sales and has lowered its full-year adjusted EPS guidance from $7-$9 to $7-$8.

As a result, Target’s share price fell as much as 5% pre-market on Wednesday, though the decline narrowed after the market opened. The stock is now at its lowest point since mid-2019. As of Tuesday, Target shares are down 34.5% year-to-date in 2025; rival Walmart rose 12.2% and the S&P 500 climbed 12.5% in the same period.

Incoming CEO: Not Satisfied with Current Performance

In August, Target announced that COO Michael Fiddelke will succeed Brian Cornell as CEO on February 1, 2026. That same month, Target and specialty retailer Ulta Beauty announced that their "Ulta Beauty at Target" in-store partnership will end when the agreement expires in August 2026.

Fiddelke said,

"We never slack off in our efforts to restore growth, and we are not satisfied with current performance."

Fiddelke joined Target as a summer intern in 2003. He pledged to strengthen the company’s focus on style and categories while improving the shopping experience and making more effective use of technology. He noted that the company’s business performance this quarter was “constantly fluctuating,” so expectations were adjusted. He added that it’s currently difficult to pinpoint the exact reasons for weak demand.

The incoming CEO told analysts the company won’t wait for macroeconomic improvement but will continue to push store reform to improve performance.

Target plans to raise capital expenditures to $5 billion next year—a 25% increase—to renovate existing stores, open new ones, and improve products and shopping experience. This includes ensuring friendlier service and better-stocked merchandise.

Outgoing CEO Brian Cornell will continue as executive chairman of the board. He said the current priority is to support the management team in driving operational reforms. Although the company’s performance has yet to reach its potential, its direction is right.

Establishing Partnership with OpenAI

On another front, the company is using AI to enhance operations, e.g., using AI to identify trends and improve customer service. Target announced a partnership with OpenAI to allow customers to use ChatGPT on its platform—a move following rival Walmart’s footsteps.

Target said customers will be able to shop using ChatGPT and receive personalized recommendations and related services.

Target reported that "shrinkage" (inventory loss due to theft, damage, etc.) has returned to pre-pandemic levels. In the retail industry, thefts are decreasing as companies strengthen cooperation with law enforcement, improve inventory tracking, and display some goods in locked cases.

Last month, the company underwent its first major reorganization in a decade, cutting 1800 jobs to reduce complexity and improve management efficiency.

Inflation Impact: Consumers Cut Back Spending

Over the past three years, weak demand has steadily eroded Target’s financial performance. Affected by inflation, consumers have reduced spending on non-essentials such as apparel and home goods, which account for most of Target’s sales.

Before Wednesday’s earnings release, Wall Street analysts had already expressed concerns about the retailer. Morgan Stanley analyst Simeon Gutman wrote in a recent report that Target "is still working to regain its leadership in design and style, and consumer dissatisfaction persists." He said that, since the company is changing CEOs next February, visibility into its performance over the next year and beyond is limited.

BofA Securities said Target faces “rising long-term sales and margin risks,” including slowing digital sales growth, lack of scale in digital advertising and third-party platforms, increased pressure from tariffs, pricing and goods management, and intense competition from Walmart and Amazon.

They pointed out that Target has higher tariff exposure and faces challenges from management changes and ending partnerships.

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