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    Target Corp (TGT)

    Q3 2025 Earnings Summary

    Reported on Feb 7, 2025 (Before Market Open)
    Pre-Earnings Price$156.00Last close (Nov 19, 2024)
    Post-Earnings Price$128.00Open (Nov 20, 2024)
    Price Change
    $-28.00(-17.95%)
    MetricYoY ChangeReason

    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 ( ).

    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    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

    MetricPeriodGuidanceActualPerformance
    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
    TopicPrevious MentionsCurrent PeriodTrend

    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

    1. 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%.

    2. 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.

    3. 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.

    4. 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.

    5. 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.

    6. 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.

    7. 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.

    8. 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.