Target’s third quarter results aligned with Wall Street’s revenue expectations, but the company continues to face subdued sales trends. Management attributed the ongoing softness primarily to cautious consumer spending and weakness in discretionary categories such as home and apparel. CEO Brian Cornell acknowledged, “Our business has not been performing up to its potential over the last few years,” highlighting Target’s focus on refining merchandising and elevating in-store and digital experiences. Leadership pointed to progress in food and beverage and digital fulfillment, but recognized that broader improvements are still necessary.
Is now the time to buy TGT? Find out in our full research report (it’s free for active Edge members).
Target (TGT) Q3 CY2025 Highlights:
- Revenue: $25.27 billion vs analyst estimates of $25.32 billion (1.6% year-on-year decline, in line)
- Adjusted EPS: $1.78 vs analyst estimates of $1.71 (4.1% beat)
- Adjusted EBITDA: $1.76 billion vs analyst estimates of $1.86 billion (7% margin, 5.6% miss)
- Management lowered its full-year Adjusted EPS guidance to $7.50 at the midpoint, a 6.3% decrease
- Operating Margin: 3.8%, in line with the same quarter last year
- Locations: 1,995 at quarter end, up from 1,978 in the same quarter last year
- Same-Store Sales fell 2.7% year on year (0.3% in the same quarter last year)
- Market Capitalization: $39.2 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Target’s Q3 Earnings Call
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Simeon Gutman (Morgan Stanley) questioned whether Target might consider a deeper margin reset similar to previous investment cycles. Chief Operating Officer Michael Fiddelke replied that the company is focused on targeted investments in merchandising and store experience, with no immediate plans for a large-scale margin reset.
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Corey Tarlowe (Jefferies) asked about the key areas for increased capital spending. Fiddelke explained that new store openings, store remodels, and technology upgrades are the primary focus, with each area chosen for its expected strong returns.
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Joseph Feldman (Telsey Advisory Group) inquired about specific changes planned for store formats. Chief Commercial Officer Rick Gomez shared examples such as further evolution of the FUN 101 category, a revamp of the home section, and improvements in the baby department to enhance customer discovery and gifting.
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Michael Baker (D.A. Davidson) sought clarity on the company’s fourth quarter outlook given recent sales volatility. Fiddelke and CFO James Lee emphasized prudent guidance, strong inventory positioning, and flexibility to respond to continued volatility in consumer demand.
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Katharine McShane (Goldman Sachs) asked about improvements in inventory and in-stocks. Fiddelke detailed progress, noting a 150 basis point improvement in top items and ongoing focus on leveraging technology and process changes for further gains.
Catalysts in Upcoming Quarters
Looking ahead, StockStory’s team will monitor (1) the pace and impact of Target’s store remodels and new location openings, (2) measurable improvements in inventory management and in-stock rates driven by technology investments, and (3) the effectiveness of new product launches in discretionary categories such as FUN 101 and home. Progress on digital fulfillment and continued consumer engagement with Target Circle 360 will also be important markers for tracking the company’s recovery and growth potential.
Target currently trades at $86.13, down from $88.52 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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