Analyst: Here’s why Target is failing

Roth Capital Markets analyst Bill Kirk maintained his “Neutral” rating and US $90.00 target price on Target Corporation (Target Corporation Stock Quote, Chart, News, Analysts, Financials NYSE:TGT) in a flash note on Nov. 19, saying the retailer’s third-quarter results reinforced concerns about weakening sales trends and limited strategic flexibility heading into the critical holiday period.

Kirk said the company remains “poorly positioned” against an unfavourable macro backdrop for discretionary spending, years of underinvestment in price and technology, and looming tariff-related cost pressures.

Target reported a 2.7% decline in comparable sales for fiscal 3Q’25, missing consensus expectations of –2.1%, while adjusted EPS of US$1.79 modestly exceeded the US$1.71 consensus. Despite the earnings beat, the company narrowed its full-year adjusted EPS guidance to US$7.00–US$8.00, from US$7.00–US$9.00 previously.

Kirk said the sales deterioration is particularly troubling “at the most important time of the retailer’s year,” noting that traffic and ticket both moved lower and that two-year stacked comps decelerated to –2.4% from +0.1% in the prior quarter. Digital sales growth remained muted at 2.4% year over year, well below leading competitors.

Kirk said Target’s overall performance points to a business losing momentum across both channels. Consolidated net sales were US$25.3-billion, in line with expectations, and EBIT margin came in at 4.4%, matching consensus. But transactions fell 2.2%, ticket slipped 0.5%, and three-year stacked comps weakened further to –7.3%.

Kirk said the company remains “poorly positioned” against an unfavourable macro backdrop for discretionary spending, years of underinvestment in price and technology, and looming tariff-related cost pressures.

Kirk said the slowdown in digital, combined with “weak in-store performance,” bodes poorly for the holiday season and puts pressure on new CEO Michael Fiddelke to consider a fiscal 2026 earnings reset, potentially during the company’s traditional investor day alongside 4Q’25 results. He added that staff reductions, price cuts on non-holiday items, and “no discernible lift in 4Q app downloads” underscore the company’s precarious positioning.

With the Q3 release, Target lowered full-year guidance for the second time in 2025, now expecting a low-single-digit sales decline in the fourth quarter. Kirk said the company will need to pivot aggressively

“After a stagnant few years (FY’25 revenue below FY’21), a return to growth will certainly be a core focus,” he said, adding that Target will “have to increase spending dramatically, an earnings-dilutive step they have, so far, been unwilling to take.”

Kirk also pointed to the long-term consequences of Target’s capital-allocation choices, calling out roughly US$10-billion in share repurchases in 2021 and early 2022, including an accelerated US$2.75-billion buyback, as funds that “would have been better used to improve relative value and/or accelerate investments.”

He contrasted Target’s approach with Walmart’s U.S. operations, which spent US$35.6-billion on supply chain, IT and related investments over the past three years, representing 2.2% of sales and including a 15% capex increase in fiscal 2025. Target, by comparison, spent US$5.5-billion in those areas (1.7% of sales) and reduced capex by 40% in fiscal 2024.

Kirk concluded that Target’s current trajectory, “comp sales declines and gross margin contraction,” remains unsustainable and keeps the risk-reward profile unfavourable despite management’s expectations for stabilization in 2026.

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