Target Q1 Sales Fall Short of Expectations
Target Corp.’s net sales took a dip in the first quarter of fiscal 2025, coming in at $23.8 billion, compared with $24.5 billion in 2024. According to the company, the 2.8% drop reflects a merchandise sales decrease of 3.1% and a 13.5% increase in other revenue.
For Q1, Target's comparable sales decreased 3.8%, reflecting a comparable-store sales decline of 5.7%.
One highlight of the quarter was that digital comps grew 4.7% reflecting more than 35% growth in same-day delivery powered by Target Circle 360 and continued growth in Drive Up.
"In the first quarter, our team navigated a highly challenging environment and focused on delivering the outstanding assortment, experience and value guests expect from Target," said Brian Cornell, chair and CEO of Target Corp. "While our sales fell short of our expectations, we saw several bright spots in the quarter, including healthy digital growth, led by a 36% increase in same-day delivery through Target Circle 360, and our strongest designer collaboration in more than a decade, kate spade for Target."
Even with these positives, Cornell went on to say that the company is not satisfied with its current performance. He believes there's potential to deliver faster progress on the company's roadmap for growth. As a result, Target has established an acceleration office, which will aim to enable faster decision-making and execution of its core strategic initiatives in support of a return to growth.
“This morning, we announced the establishment of a multi-year acceleration office, led by Michael Fiddelke, along with several leadership changes,” explained Cornell. “These steps forward are intended to build more speed and agility into how we operate, and position key capabilities to drive long-term profitable growth. With these changes and the financial strength to continue investing in our business, I'm confident we can emerge an even stronger company over time."
Meanwhile, other Q1 results included a $1.5 billion operating income, 13.6% higher than last year. The gross margin rate was 28.2%, compared with 28.8% in 2024, reflecting the net impact of merchandising activities, including higher markdown rates, as well as digital fulfillment and supply chain costs due to increased digital sales penetration and new supply chain facilities coming online. These pressures were partly offset by the benefit of lower inventory shrink.
SG&A expense rate was 19.3% in 2025, compared with 21.0% in 2024, reflecting credit card interchange fee settlements and cost management, partly offset by the deleveraging impact of lower sales and higher costs, including team member pay and benefits. Without the litigation settlement gains, the SG&A expense rate was 21.7% in Q1 2025.
The company reported GAAP earnings per share (EPS) of $2.27 and adjusted earnings per share of $1.30 compared with GAAP and adjusted EPS of $2.03 in 2024.
Looking ahead, Target has cut its annual sales projections. The company now expects a low-single-digit decline in sales for 2025 after projecting a 1% increase for sales in March. GAAP EPS is expected to be $8 to $10. Adjusted EPS, which excludes the gains from the litigation settlements in the first quarter, is expected to be approximately $7 to $9.
In the meantime, the company is capitalizing on the success of Target Circle 360 with the launch of a new program for its loyalty members that provides delivery via Shipt, its fully owned subsidiary, from more than 100 retailers beyond Target – with no same-day delivery price markups that would get passed on to customers. While same-day delivery from Target has always been free of price markups, this latest offering aims to make this service from many more locations even easier and more affordable.
Minneapolis-based Target Corp. is No. 7 on The PG 100, Progressive Grocer’s 2025 list of the top food and consumables retailers in North America, with nearly 2,000 locations. PG also included the company on its Retailers of the Century list.
