As the S&P 500 index flirts with all-time highs, shares of Target (TGT -2.25%) have lost more than 40% of their value in the last year. While the broader market is clearly in a bull phase, this giant retailer is deep into its own personal bear market. That's left it with a historically high yield and, if you have the patience and stomach, material turnaround appeal.
What's gone wrong at Target
From a big picture perspective, there's nothing unusual happening with Target today. The retail sector serves fickle consumers and even the most iconic and best known companies in the space go in and out of favor over time. You could easily argue that it is just Target's turn in the barrel.
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Of course that's a very high level view of things. The truth is that Target isn't resonating well with consumers right now. In the second quarter of 2025 the company's top line fell 0.9%, with same-store sales declining a worrying 1.2%. To be fair, that was an improvement over recent performance, but that's hardly an inspiring fact. For comparison, the company's largest competitor, Walmart, saw sales increase 4.8% in the second quarter with same store sales in the U.S. rising 4.6%. Clearly, Target's slightly upscale approach is not "on target" with what consumers are looking for while Walmart's everyday low price approach is.
Here's the interesting thing. Target is a Dividend King, with over five decades worth of annual dividend increases behind it. You don't build a record like that by accident, it requires a strong business model that is executed well in both good times and bad times. Simply put, Target has been through shifts in consumer buying habits before and survived, while continuing to reward investors with a growing income stream. There's no particular reason to believe it won't do the same this time around, giving the stock appeal for long-term investors looking to build million-dollar portfolios.
Target is making steps to change with the times
Clearly, Target's leadership is aware of the sales problem in the business. So, too, is the board of directors. Both have taken action to get the retailer back on track. On the management side, the company eliminated the position of chief strategy and growth officer and is now taking a team approach to overseeing business development. That's a statement that management believes it needs more variety in the way its looks at the problems it faces today.
From the board of directors side of things, Target just brought on a new CEO. Once again, the company is attempting to bring in a new set of eyes to deal with its problems. But a dividend hike announced in June also makes clear to investors that Target's board and management team remain confident that the business can be turned around. The 1.8% increase is largely a token hike, however the statement that is being made is very important.
All of that said, it will not be a smooth ride, that's just not how business works. There is clear turnaround potential, but with a new CEO and a new team overseeing the top-level operational decisions, it is likely that changes will take place that require time to fully enact. Thus, a real business turnaround will be a multiyear affair. And the near-term effort could involve a "kitchen sink" mentality, in which the new leaders try to push all of the bad news they can (including the kitchen sink) up front so that they don't get blamed for past failures. And, well, if you front load the bad stuff, future results will likely look even better.
Target is not for the faint of heart
If you think in decades and not days, Target could be a worthwhile buy while it muddles through its own personal bear market. Note that the 5% dividend yield is near the highest levels in the company's recent history, so you will be paid very well to wait for management to get the business moving in a better direction.
That said, if you aren't prepared for more bad news and what that might mean for the stock in the short term, you will probably want to wait for a clear upturn on the top line and in the same store sales figures. Of course, the stock will likely have recovered significantly by that point, so being cautious will probably mean you'll miss out on what seems like a contrarian opportunity available right now.
