Target had a tough 2024: Its stock price declined, it struggled to deliver consistent sales growth, and it faced lawsuits related to its diversity, equity and inclusion practices and then calls for boycotts when it abandoned them.
On Tuesday, the retailer tried to offer Wall Street some optimism for the year ahead — predicting flat comparable sales and a “modest” increase in its operating margin rate. But even that muted outlook came with warnings about slightly lower sales in February and uncertainty over tariffs and consumer confidence.
The company reported a solid holiday season, with fourth-quarter sales increasing 1.5 percent from a year earlier, bolstered by apparel, toys, beauty products and sporting goods. E-commerce sales jumped 8.7 percent in the quarter, which ended Feb. 1, and combined in-store and online traffic was up 2.1 percent.
“Our team grew traffic and delivered better-than-expected sales and profitability in our biggest quarter of the year,” Brian Cornell, chief executive of Target, said in a statement.
Full-year comparable sales rose 0.1 percent, Target said. Walmart, by contrast, reported a 4.4 percent increase for the year.
While the results were subdued, the rise in sales was welcome news for Target, which has sought to win back customers who pulled back on discretionary purchases because of inflation.
The retailer noted, however, that macroeconomic forces, including tariffs, could cause its customers to hold back on spending.
President Trump has ordered sweeping tariffs on Canada, Mexico and China. Those tariffs, which took effect on Tuesday, place a 25 percent fee on all Mexican and Canadian imports to the United States and an additional 10 percent on Chinese goods on top of the 10 percent levied last month. That could affect a general merchandiser like Target.
“Most of general merchandise, or a chunk of it anyway, tends to come from abroad,” said Steven Shemesh, an equity research analyst at RBC Capital Markets. “That will have the potential to create increased inflation looking forward, which certainly isn’t going to help the situation.”
After a positive quarter of sales over the summer, the company reported an unexpected downturn in November, and a surprised Wall Street sent Target’s stock down 21 percent. The price has fallen 52 percent since its peak in November 2021 through the market close on Monday. The company’s shares jumped as much as 3.9 percent on Tuesday after the earnings report was released.
Sluggish sales performance is just one of many challenges that Target has faced in recent months. In a lawsuit filed last month, the State Board of Administration of Florida, the agency that oversees the state’s public employee retirement funds, accused Target and its board of directors of deceiving shareholders about the risk of its 2023 Pride Month campaign. Some shoppers reacted angrily to the campaign, which included L.G.B.T.Q.-themed apparel for children.
Target responded by moving its display to the back of stores in some Southern states. The lawsuit, which seeks class-action status, claims that the customer backlash wiped billions of dollars from the retailer’s market value.
Then, in January, the company retreated on its D.E.I. practices, part of a larger pullback on diversity policies among corporations. Customers quickly denounced Target’s decision, noting that the retailer had long been viewed as a friendly environment that sold and highlighted merchandise from many minority communities. Several groups called on shoppers to boycott Target for its change in policies.
Target’s fourth quarter ended before the boycott was underway. The company did note that it saw a “small decline in February net sales,” but a statement from the chief financial officer attributed the slowdown to “uncharacteristically cold weather across the U.S.” that affected clothing sales.
At the company’s annual investor conference later Tuesday in New York City, analysts are keen to hear more about Target’s overall strategy.
“They need to talk about what are the values of Target,” said Kimberly Lee Minor, chief executive of Women of Color Retail Alliance, a consulting firm. “I think they need to do a real brand audit so that the Street can understand what are the gaps and how are they addressing them?”
