Target (TGT 2.67%), one of America's top retailers with nearly 2,000 stores, saw its stock plunge by more than 30% over the past five years. At $120, it looks cheap at 15 times this year's earnings, but it could stay flat through the end of 2026 for three simple reasons.
1. Its top-line growth is cooling
Target's comparable store sales only rose 2.2% in fiscal 2022 (which ended in Feb. 2022), declined 3.7% in fiscal 2023, rose just 0.1% in fiscal 2024, and fell 2.6% in fiscal 2025. For fiscal 2026, it anticipates a "small increase in comparable sales."
Image source: Getty Images.
Analysts expect Target's total revenue to rise 2% to $106.75 billion in fiscal 2026, but that's still below the $107.41 billion it generated in fiscal 2023. That slowdown was caused by inflationary headwinds for consumer spending, intense competition from Walmart (WMT +1.49%) and Amazon (AMZN 1.52%), sluggish sales of larger products (including appliances, TVs, and outdoor furniture), supply chain disruptions, and a rising "shrink rate" from shoplifters. It's also faced politically driven boycotts over its elimination of diversity, equity, and inclusivity (DEI) initiatives, its sale of LGBTQ-themed products, and its response to the recent ICE raids.
NYSE: TGT
Key Data Points
2. Its margins are shrinking
As Target's top-line growth cooled, it sought to reduce inventory by aggressively marking down merchandise. That strategy reduced its gross margin from 28.3% in fiscal 2021 to 23.6% in fiscal 2022, but it rebounded to 28.2% in fiscal 2024 after it right-sized its inventory. Unfortunately, its gross margin declined to 27.9% in fiscal 2025 as it increased markdowns again, sold lower-margin products, and faced higher order cancellation costs. The unpredictable tariffs exacerbated that pressure.
It expects its adjusted operating margin -- which declined 60 basis points year over year to 4.6% in 2025 -- to only rise 20 basis points in 2026 as it continues cutting costs.
3. Its new CEO is its former COO
Target's new CEO, Michael Fiddelke, took over on Feb. 2. Since then, he's already shaken up its executive team, eliminated 500 corporate roles, and increased staffing in some stores to improve the overall customer experience. Fiddelke also believes Target should curate its products more carefully to differentiate itself from Walmart and Amazon.
Those moves could complement Target's turnaround plans under its previous CEO, Brian Cornell, which included expanding its e-commerce marketplace, upgrading its AI-driven tools, "reimagining" its higher-growth product categories, and offering more perks to its Circle 360 subscribers. But Fiddelke couldn't help stabilize Target's growth when he was COO, so he might struggle to execute those strategies going forward.
Why will Target's stock stay flat?
Target's low valuation and 3.8% forward yield should limit its downside, but it won't rally until it steadily improves its comps and margins. That's why I believe it will trade sideways for the rest of the year.
