Target has just posted its Q1 2025 results, and the message is clear: digital channels are gaining steam, but the core business is still under pressure. With foot traffic down, spending soft, and margins under strain (even with a one-time legal boost), the retailer is leaning hard into reinvention.
Net Sales: Fell 2.8% YoY to $23.8B, down from $24.5B in Q1 2024.
Comparable Sales: Down 3.8%, driven by a sharp 5.7% decline in store-originated sales.
Digital Sales: Bright spot, up 4.7%, with same-day delivery via Target Circle 360 soaring 36%.
GAAP EPS: Rose 11.7% YoY to $2.27, bolstered by a $593M legal settlement gain.
Adjusted EPS: $1.30, down from $2.03 last year — a more realistic snapshot of core performance.
Target’s topline contraction reflects a broader slowdown in U.S. discretionary spending, especially across home décor (-8.5%), apparel (-4.8%), and household essentials (-4.2%). Even beauty, once a reliable growth engine, posted flat sales.
The pain was felt most acutely in brick-and-mortar traffic, which dropped 2.4%, while average basket size slipped 1.4% — a double hit to store comps.
🗣️ CEO Brian Cornell: “While our sales fell short of expectations, healthy digital growth and our strongest designer collab in over a decade — Kate Spade for Target — reinforced the strength of our brand.”.
Target’s digital efforts continue to pay off.
Same-day services, especially Drive Up and Target Circle 360, drove a 4.7% increase in online sales, now accounting for 19.8% of total sales, up from 18.3% a year ago. This push aligns with broader consumer shifts toward convenience and immediacy — a domain where Target is increasingly competitive with Amazon and Walmart.
Operating income grew 13.6% YoY to $1.47B, but much of that gain came from a $593M pre-tax settlement related to credit card interchange fees. Strip that out, and margins tell a tougher story:
Adjusted Operating Margin: Fell to 3.7%, down from 5.3% last year.
Gross Margin: Slipped to 28.2% from 28.8%, as markdowns and digital fulfillment costs weighed heavily.
SG&A (Ex-Litigation): Rose to 21.7%, reflecting elevated labor and supply chain expenses.
Cash from operations nosedived to $275M, down from $1.1B last year, driven by rising inventory levels (+11.2% YoY) and a $1.3B drop in accounts payable.
Still, Target returned cash to shareholders:
$510M in dividends
$251M in share repurchases
And it retains a healthy $8.4B repurchase authorization.
In a bid to jumpstart growth, Target launched a new “acceleration office” headed by Michael Fiddelke, former CFO, to fast-track decision-making and revamp execution.
The company also announced leadership changes, underscoring the urgency to reverse traffic declines and improve agility. Current Chief Strategy and Growth Officer Christina Hennington will step into a new role as strategic adviser, supporting Target’s long-term initiatives and leadership transition.
FY2025 Sales: Expected to decline by low single digits
GAAP EPS Guidance: $8.00–$10.00
Adjusted EPS Guidance: $7.00–$9.00
With a cautious consumer, rising cost pressures, and no immediate macro tailwinds, Target’s turnaround hinges on its ability to scale digital, manage inventory smartly, and recapture foot traffic.
Target remains a brand with enduring consumer appeal — but it's in a transition phase. The retailer is leaning hard into digital, supply chain investments, and experience-led differentiators. However, until store traffic rebounds and inventory productivity improves, growth will remain uneven.
This quarter’s results highlight both resilience and fragility — and signal that 2025 will be a year of recalibration, not runaway success.
Check out the full earnings report here - Target Earnings Report