Target reduced its fiscal-year earnings guidance after sales declined for the fourth consecutive quarter, with comparable sales down 2.7 percent.
Net sales of $25.3 billion in the third quarter were 1.5 percent lower than last year, reflecting a merchandise sales decrease of 1.9 percent, partially offset by a 17.7 percent increase in non-merchandise sales. Sales were aligned with analysts’ consensus estimate.
The 2.7 percent decline in comparable sales reflected a 3.8 percent comparable-store sales decline, partially offset by comparable digital sales growth of 2.4 percent. The 2.4 percent digital comparable sales were led by over 35 percent growth in same-day delivery powered by Target Circle 360.
Food & Beverage and Hardlines (Fun 101) delivered comparable sales growth in the quarter, offset by continued softness across the retailer’s broader discretionary portfolio. Non-merchandise sales grew nearly 18 percent with Roundel, membership and marketplace revenues all growing double digits.
Third quarter operating income, which includes the impact of non-recurring items, was $0.9 billion, 18.9 percent lower than last year. Excluding those non-recurring items, operating income was $1.1 billion. Third quarter operating income margin rate, which includes the impact of non-recurring items, was 3.8 percent in 2025, compared with 4.6 percent in 2024. Excluding those non-recurring items, the operating margin rate was 4.4 percent in 2025.
Third quarter gross margin rate was 28.2 percent, compared with 28.3 percent in 2024, reflecting merchandising pressure from increased markdowns, partially offset by growth in advertising and other revenues, lower inventory shrine and efficiency gains in supply chain and digital fulfillment. Third-quarter SG&A expense rate, including non-recurring items, was 21.9 percent, compared with 21.3 percent in 2024. Excluding those non-recurring items, SG&A expense rate was 21.3 percent in Q3 2025, in line with last year.
The company reported third quarter GAAP earnings per share (EPS) of $1.51 and adjusted earnings per share1 of $1.78, down from GAAP and adjusted EPS of $1.85 in 2024. Fiscal third-quarter adjusted earnings of $1.78 a share were above analysts’ expectations for $1.71.
“Thanks to the incredible work and dedication of the Target team, our third quarter performance was in line with our expectations, despite multiple challenges continuing to face our business,” said Michael Fiddelke, incoming chief executive officer of Target. “As we head into the all-important holiday season, our team is well-prepared and ready to serve our guests with the great products, value, and inspiration they expect from Target. At the same time, we continue to focus on the important work to deliver on our three key priorities: solidifying our merchandising authority, elevating the shopping experience, and further harnessing the power of technology to move at a greater pace and consistency, all in support of a return to sustainable growth.”
Interest Expense and Taxes
The company’s third quarter 2025 net interest expense was $115 million, compared with $105 million last year, reflecting higher average debt levels in the current year.
Third quarter 2025 effective income tax rate was 19.8 percent, compared with the prior-year rate of 21.7 percent, reflecting the benefit of additional tax credits in the current year.
Capital Deployment and Return on Invested Capital
The company paid dividends of $518 million in the third quarter, compared with $516 million last year, reflecting a 1.8 percent increase in the dividend per share, offset by a lower average share count.
The company repurchased $152 million of its shares in the third quarter, retiring 1.7 million shares of common stock at an average price of $91.59. As of the end of the quarter, the company had approximately $8.3 billion of remaining capacity under the repurchase program approved by Target’s Board of Directors in August 2021.
For the trailing twelve months through third quarter 2025, after-tax return on invested capital (ROIC) was 13.4 percent, compared with 15.9 percent for the trailing twelve months through third quarter 2024. The tables in this release provide additional information about the company’s ROIC calculation.
Guidance
For the fourth quarter of 2025, the company is maintaining its expectation of a low-single digit decline in sales.
Full-year GAAP EPS is now expected to be approximately $7.70 to $8.70, down from a past range of $8 to $10. Full-year adjusted EPS, which excludes the gains from the litigation settlements in the first quarter and severance and asset-related charges in the third quarter, is now expected to be approximately $7.00 to $8.00 compared with its prior projection of $7 to $9.
Image courtesy Target
