Target Posts Mixed Q3 Results as Sales Slip and Guidance Turns Cautious

Target Corporation (NYSE: TGT) recently released its third-quarter 2025 financial results, presenting a mixed performance against expectations. The quarter was marked by a slight earnings per share (EPS) beat, but the company fell short of revenue expectations. As the company looks ahead, it maintains a cautious outlook for the remainder of the year.

Q3 Sales Decline Overshadows EPS Beat

Target Corporation reported third-quarter 2025 net sales of $25.3 billion, a 1.5% decline from the previous year. Digital comparable sales saw a modest 2.4% growth, driven by a significant increase in same-day delivery services. However, these gains were offset by a decrease in overall discretionary spending, impacting the company’s broader sales portfolio. Despite these challenges, Target managed to deliver an adjusted EPS of $1.78, slightly surpassing the market expectation of $1.76. This EPS beat was achieved even as the company’s GAAP EPS fell from $1.85 in the previous year to $1.51 this quarter, reflecting non-recurring severance and asset-related charges.

When comparing the actual figures to the expectations, it is evident that Target exceeded EPS predictions but did not meet revenue forecasts. The anticipated revenue was $25.35 billion, but the actual figure came in slightly lower at $25.27 billion. This shortfall can be attributed to a 2.7% decline in comparable sales, with store-originated sales decreasing by 3.8%. The company’s operating income also saw a decline, down 18.9% from the previous year, reflecting the impact of non-recurring items. Excluding these items, the operating income was $1.1 billion, highlighting the underlying challenges in maintaining profitability amidst a competitive retail environment.

In terms of sales categories, Food & Beverage, along with Hardlines, showed growth, but other areas such as Apparel & Accessories and Home Furnishings saw declines. Non-merchandise sales, including revenues from Roundel and other digital advertising streams, grew by nearly 18%, indicating a strategic pivot to diversify income sources. This diversification, however, was not sufficient to counterbalance the overall decline in merchandise sales, which fell by 1.9% compared to the previous year.

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Target Issues Cautious Q4 Outlook Amid Soft Demand

Looking ahead, Target Corporation maintains a cautious stance for its fourth-quarter 2025 guidance. The company expects a low-single-digit decline in sales, reflecting ongoing challenges in consumer spending and the broader economic landscape. The full-year GAAP EPS is projected to be in the range of $7.70 to $8.70, with adjusted EPS expected between $7.00 and $8.00. These projections account for gains from litigation settlements and costs related to business transformations.

Target’s strategic focus remains on enhancing its merchandising authority, improving the shopping experience, and leveraging technology for operational efficiency. The company plans to introduce over 20,000 new items, with more than half being exclusive to Target, aiming to attract consumers during the crucial holiday season. Additionally, Target is committed to offering value through competitive pricing, such as Thanksgiving meals for under $20, and expanding its fulfillment options to include next-day shipping for a significant portion of the U.S. population.

Despite the challenges, Target continues to invest in its future growth. The company paid $518 million in dividends during the third quarter and repurchased $152 million of its shares, signaling confidence in its long-term strategy. With a focus on sustainable growth, Target is poised to navigate the current economic uncertainties while positioning itself for future opportunities. The company’s ongoing initiatives in digital transformation and customer engagement are expected to play a pivotal role in achieving its strategic objectives.

Disclaimer: The author does not hold or have a position in any securities discussed in the article. All stock prices were quoted at the time of writing.