Q3 2025 Earnings Summary
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +1% ( ) | Driven by slower growth in traffic relative to prior quarters, reflecting continued softness in discretionary categories (e.g., Apparel, Home) seen previously ( ). At the same time, essential items and certain frequency categories still contributed modest gains, preventing a steeper decline ( ). |
Home Furnishings & Décor | -5% ( ) | Continues the discretionary softness trend from earlier periods, where guests pulled back on non-essential spending amid inflationary or budget constraints ( ). Shifts in consumer priorities toward services and travel also contributed to this decrease, echoing Q2 2024’s double-digit declines in the category ( ). |
Other Revenue | +28% ( ) | Primarily fueled by strong Roundel advertising performance, consistent with the double-digit ad revenue growth observed in prior quarters ( ). This line also benefited from credit card profit-sharing improvements and other income streams, offsetting softer trends in some discretionary segments ( ). |
Operating Income (EBIT) | -11% ( ) | Although margins had improved in 2024 and 2025 due to leaner inventory and lower freight costs, the slower top-line growth and persistent shrink pressures have narrowed the operating margin in the current period ( ). Additionally, escalated wage and supply chain costs dampened EBIT growth ( ). |
Net Income | -12% ( ) | Reflects weaker operating leverage as revenue growth decelerated while certain costs—such as SG&A and shrink—remained elevated ( ). Despite prior improvements in gross margin, the combination of cautious consumer spending and higher expenses reduced overall profitability ( ). |
Diluted EPS | -12% ( ) | Mirrors the decline in net income and lower operating margin, compared to stronger EPS recoveries in Q2 2024 and Q2 2025 ( ). Slower discretionary spending and inflationary cost pressures constrained profit gains, leading to reduced EPS versus the prior year ( ). |
Capital Expenditures (CapEx) | -87% ( ) | A result of updated project timing and a strategic decision to scale back near-term expansion, reflecting guidance that full-year CapEx would likely be on the lower end of the range ( ). After investing heavily in new stores, remodels, and supply chain modernization in previous periods, TGT is pausing large outlays now ( ). |
Dividend Payments | -74% ( ) | Significantly lower than the prior year, partly due to capital allocation decisions as the company navigates uncertain consumer demand ( ). While TGT has a history of annual dividend increases, the total dollar outlay can fluctuate if share repurchases or other capital priorities shift year to year ( ). |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Comparable Sales | Q4 2025 | no prior guidance | around flat | no prior guidance |
EPS | Q4 2025 | no prior guidance | $1.85 to $2.45 | no prior guidance |
Inventory Shrink Impact | Q4 2025 | no prior guidance | approximately flat | no prior guidance |
Operating Income Impact (Calendar) | Q4 2025 | no prior guidance | nearly 1 ppt headwind to comps | no prior guidance |
Comparable Sales | FY 2025 | 0% to 2% | slightly negative comp | lowered |
EPS | FY 2025 | $9.00 to $9.70 | $8.30 to $8.90 | lowered |
CapEx | FY 2025 | no prior guidance | $4B to $5B | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Comparable Sales Growth | Q3 2025 | 0% to 2% | ~1.06% YoY (derived from Total Revenue Q3 2024: 25,398Vs. Q3 2025: 25,668) | Met |
GAAP and Adjusted EPS | Q3 2025 | $2.10 to $2.40 | $1.85 | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Persistent weakness in discretionary categories | Q2 (improvements, still soft ), Q1 , Q4 | Continues with softness in Home, Hardlines, Apparel due to cautious spending | Ongoing challenge |
Inventory management and levels | Q2 (slightly lower YOY ), Q1 (down 7% YOY ), Q4 (improved management ) | Inventory up 3% YOY; elevated earlier due to port disruptions, aiming for a “clean” year end | Shifted from improved to elevated |
Margin pressures and promotional environment | Q2 (more promotional but margins improved ), Q1 (slight margin improvement ), Q4 (recovery ) | Margins pressured by higher health care, liability costs; stronger reliance on promotions | From improvement to pressure in Q3 |
Uncertain consumer environment | Q2 (“resilient but choiceful” ), Q1 (cautious outlook ), Q4 (mixed outlook ) | Cautious, “resourceful” consumer behavior impacting discretionary categories | Continues across all periods |
Over-reliance on promotions for sales growth | Q1 (analyst concern ); no specific mention in Q2 or Q4 | Highlighted event-driven spikes; increased markdown rates | Re-emphasized in Q3 |
Softness in credit card business | Q1 (decline offset by ad revenue ), Q4 (return to normal ) | No mention | No longer discussed |
Collaborations with premium brands and own brands | Q2 (brand launches, e.g., Gigglescape ), Q1 (DVF, Prince ), Q4 (Ulta expansion ) | Ongoing focus on unique partnerships, strong own brand performance | Continuous emphasis |
Taylor Swift collaboration as a new traffic driver | Q1 (album launch drove strong traffic ) | Exclusive Black Friday releases (vinyl, CDs) expected to boost holiday traffic | Reintroduced in Q3 |
Planned CapEx of $4–$5B for future store footprint | Q4 (annual CapEx to run $3.5–$5.5B ) | Plans to invest in new stores, remodels, supply chain; aligns with long-term strategy | New detail in Q3 |
Emerging cost headwinds in health care and liability | Not discussed in prior calls | Health care and liability costs lifted SG&A; unexpected pressures | New in Q3 |
Sentiment shift on margins from improved to pressured | Q2 (margin improvement ), Q1 (slightly up ), Q4 (modest rebound ) | Pressured margins attributed to cost headwinds and weak discretionary sales | Negative shift in Q3 |
Sentiment shift on inventory from improved to elevated | Not mentioned previously | Elevated by supply chain disruptions and softer demand | New negative sentiment in Q3 |
Long-term store expansion plans with large revenue potential | Q1 (300 new stores goal ), Q4 ($15B incremental sales ) | Robust pipeline of new stores over the next decade | Ongoing expansion strategy |
Growth in digital and omnichannel services | Q2 (high single-digit digital comps ), Q1 (digital +1.4% ), Q4 (6B visits, multi-channel ) | Digital sales +11%; strong same-day, Drive Up, ship-to-home gains | Consistent growth |
High-profile partnerships as future growth drivers | Q2 (haircare lines ), Q1 (DVF, Prince, Ulta ), Q4 (Disney, Apple ) | New tie-ins (Taylor Swift, Wicked movie) boosting traffic | Continued expansions |
-
Profit Impact and Guidance
Q: What is the magnitude of unique costs, and how do they affect Q4 guidance?
A: We experienced additional costs due to prepositioning inventory ahead of a potential port strike, which is unique to this year. Home and apparel decelerated about 4 percentage points from Q2, impacting profits in Q3. We anticipate ending the year with clean inventory and have guided cautiously for Q4, considering these factors. On the SG&A line, general liability and health care costs increased approximately 1%. -
Discretionary Recovery Outlook
Q: Do you expect a better outlook for discretionary categories in 2025?
A: While discretionary categories remain challenged, we see bright spots, especially in apparel where our "All in Motion" brand is delivering double-digit growth. We're optimistic about consumer response to new styles and expect continued improvement as we lean into innovation and value. Discretionary categories will continue to represent up to 50% of our business, and we'll plan cautiously to stay in step with consumer trends. -
Growth Strategies
Q: Does Target need to invest differently to drive consistent performance?
A: We'll continue to focus on being Target, leveraging our unique mix of national and owned brands, and partnerships like our upcoming Black Friday collaboration with Taylor Swift. We're investing in our stores and expanding digital assets, with digital sales up almost 11% in Q3. Our Circle loyalty program added 3 million new members in Q3, enhancing customer engagement. -
Consumer Behavior and Promotions
Q: Are consumers' increasing preference for promotions affecting your Q4 approach?
A: Consumers have become more resourceful, actively seeking value and promotions for everyday essentials. We'll lean into providing the right value throughout the holiday season, ensuring we stay in step with consumer expectations. This trend is expected to continue into 2025. -
Capital Expenditure Plans
Q: Is CapEx at 4% of sales now a steady state?
A: We'll close this year with CapEx at about $3 billion, slightly lower than expected. For 2025, we're planning CapEx in the range of $4 billion to $5 billion, focusing on new stores, remodels, technology, and supply chain investments. -
Inventory Positioning
Q: How are you managing inventory risk in Q4?
A: Inventory is up about 3% year-over-year, positioning us well for the holiday season. We're focused on ending the year with clean inventory and have guided Q4 accordingly. -
Target Circle Impact
Q: Is the Target Circle relaunch impacting costs more than expected?
A: We're excited about the guest response to Circle 360, adding 3 million new members. Same-day delivery grew by almost 20% in the quarter. These investments are accretive to both the top and bottom lines over time. -
Supply Chain and One-Time Costs
Q: Can you quantify the one-time supply chain impacts in Q3 and Q4?
A: Unique factors this year, like moving inventory due to the port strike, affected expenses in Q3. We feel we're on the other side of these disruptions now. We'll manage through any lingering effects over time, focusing on efficiency improvements.
Research analysts covering TARGET.