Release Date: May 21, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Target Corp (TGT, Financial) reported mid-single-digit growth in its first-party digital business, with a notable 36% increase in same-day delivery powered by Target Circle 360.
- The company saw strong performance in its limited-time design partnership with Kate Spade, marking the most successful collaboration in over a decade.
- Target Corp (TGT) experienced progress in inventory shrink, with rates moderating from extreme levels encountered in previous years.
- The company is investing in new stores, ongoing remodels, and technology, which are expected to support long-term growth.
- Target Corp (TGT) is expanding its Target Plus marketplace, with a 20% growth in GMV this quarter, adding hundreds of new partners to the platform.
Negative Points
- Target Corp (TGT) faced a 2.8% decline in net sales for the first quarter, driven by a decrease in traffic and lower average basket size.
- The company experienced pressure from higher markdowns and digital fulfillment costs, impacting its gross margin.
- Target Corp (TGT) is dealing with ongoing challenges in discretionary categories due to declining consumer confidence and high inflation.
- The company anticipates continued sales pressure and tariff impacts, which could affect profitability in the near term.
- Target Corp (TGT) is taking actions to right-size inventory, which may lead to incremental markdowns and receipt adjustment costs in the second quarter.
Q & A Highlights
Q: Is your expectation that comps turn positive in the back half or by the fourth quarter? And will the inventory adjustment cost be behind you such that gross margin will be up?
A: We expect low single-digit declines for the balance of the year, including Q4. The inventory and receipt adjustment costs are expected to occur mostly in the first half of the year, and we should be through that by the second half.
Q: Can you talk about how you're offsetting the incremental tariff exposure and your view on prices in the back half?
A: We are committed to delivering high-quality products at affordable prices. Our strategies include diversifying the country of production, evolving our assortment, and partnering closely with vendors to offset the vast majority of the tariff impact.
Q: What are some key efforts to drive stronger traffic and in-store trends? How do you feel about your price gaps and positioning?
A: We focus on retail fundamentals like inventory management and providing a great in-store experience. We are comfortable with our price gaps and are committed to delivering value through competitive pricing and promotions, such as the new benefits in Target Circle 360.
Q: Is the challenge that other retailers have caught up, and is improving execution enough to address this?
A: We focus on retail fundamentals and delivering newness with great assortments. Our strategy is built for growth, and we need to move faster. The acceleration office will help streamline operations and fast-track critical work.
Q: Does the guidance include the 30% tariff on China, and can most of the offset take place without pricing?
A: Our guidance includes current tariff rates and contemplates inventory management, pricing, and promotion strategies. We have taken a conservative approach, and the wide range of our guidance gives us flexibility to take necessary actions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
