Target sinks on expense concerns despite Q1 earnings beat
Target shares are sinking in volatile early Wednesday trading, erasing its premarket gains as investor anxiety over rising corporate overhead and tightening profit margins appeared to overawe strong Q1 earnings results that beat Wall Street estimates.
Key numbers:
Revenue of $25.44 billion (estimate: $24.11 billion).
Adjusted earnings per share of $1.71 (estimate: $1.43).
Same-store sales growth of 5.6% (estimate: 1.85%).
Target’s headline numbers signaled a clear, if partial, comeback story with 6.7% net sales growth, breaking a yearlong slump. The company also raised its full-year sales growth forecast to 4.0% compared with 2025, double its previous forecast of 2% growth. The company now projects annual EPS to land at the high end of its $7.50 to $8.50 range, beating the $8.10 consensus estimate from Wall Street.
However, Target’s operational expenses climbed to 21.9% of its total revenue last quarter, up from last year, with the company citing “higher compensation costs” and “higher marketing expense” to explain the jump. These rising costs were only partially offset by the boost from Target’s strong sales growth.
“While we have momentum, we’re also being cautious about the near-term operating environment,” said Michael Fiddelke, CEO of Target. “With consumers weighing multiple headwinds and tailwinds, and recent dips in consumer sentiment, we continue to place a premium on flexibility, not wanting to swing too hard too quickly, despite the early signs of momentum we’re seeing.”
This is the first earnings report under the newly appointed CEO, who officially took the helm in February and who’s focused on enhancing operational efficiency amid a prolonged retail sales slump.
Target yesterday announced that it tapped former Walmart exec Jeff England as chief supply chain officer to optimize inventory and delivery, part of a wider $6 billion turnaround. The retailer is also overhauling its beauty, baby, and apparel categories through exclusive Parke and “Pokémon” partnerships, though margins remain sensitive to inventory markdowns and labor costs.
