Many investors were eager to see how retail giant Target's (TGT 2.50%) latest quarter would look, and, unfortunately, it wasn't great. The company missed analysts' consensus estimates for sales and earnings, and management lowered the company's full-year outlook.
Target has been on a rough path over the past few years, and the next 12 months could be rocky as well. Here's where Target stock could be in one year.
Image source: Target.
From bad to worse
Target's sales declined in 2024, and investors were hoping that 2025 might be the start of something new for the retail giant, but they were quickly disappointed when Target reported a 5.7% same-store sales decline in the first quarter.
The company's sales of $23.8 billion were down nearly 3% from the year-ago quarter and missed Wall Street's consensus estimate of $24.2 billion. Meanwhile, non-GAAP (generally accepted accounting principles) adjusted earnings fell 36% to $1.30 per share.
Those earnings fell short of the analysts' consensus estimate of $1.61 per share, and the result of the company's poor performance in the quarter sent the stock tumbling, leaving it down 39% over the past year.
Management doesn't sound optimistic about 2025
Target CEO Brian Cornell said on the earnings call that his company is facing an "exceptionally challenging environment" and added the company faces several headwinds right now, including declining consumer confidence and potential tariff impact. He added: "I want to be clear that we're not satisfied with this performance, and we're moving with urgency to navigate through this period of volatility."
As a result, Target lowered its sales guidance for the full year, expecting a decline in the low single digits, compared to its previous estimate of an increase of about 1%. This means any hope investors had that 2025 would be the year that Target experiences a meaningful turnaround has been squashed.
One problem for Target right now is that many customers are focusing on essential spending, like groceries, and are shifting their spending to other retailers that offer lower prices and more selection, like Walmart.
The bad news is that consumers appear to be tightening their belts as they navigate economic uncertainties from tariffs and a potential slowdown in the economy. A recent University of Michigan survey found that consumer outlook has dropped to its second-lowest level on record as Americans anticipate that tariffs could cause inflation.
With Target's management guiding for sales to decline this year by the low single digits -- and Wall Street's consensus estimate expecting a 1.7% decline -- the company is clearly facing another difficult year.
Is Target stock a buy right now?
I think it's best to hold off on buying Target stock. There are still plenty of uncertainties with the economy, with some tariffs recently going into effect and others temporarily paused. While Target's management hasn't raised prices yet and says it would do so as a "very last resort," it still could later on.
Plus, if tariffs end up causing significant cost increases for consumers, higher inflation, or even an economic slowdown, Target could face even more pressure on its sales than the company anticipates right now.
Target isn't in a death spiral, but to get back to growth, it needs U.S. consumers to feel confident in their spending again. And for now, that's just not the case.
