Target Corp. reported same-store sales declined 2.5 percent in the fourth quarter on weak store traffic, marking its fourth consecutive decline in same-store sales. Earnings were up slightly on an adjusted basis. Results were in line with expectations. Sales and traffic trends accelerated in the last two months of the quarter, and Target forecasted a return to growth this year.

Adjusted EPS reached $2.44, surpassing Wall Street’s $2.16 projection. Quarterly net sales decreased 1.5 percent to $30.5 billion, meeting the analysts’ consensus estimate of $30.47 billion. 

Highlights

  • Fourth quarter net sales of $30.5 billion were in line with company expectations.
  • Food & Beverage, Beauty, and Toys delivered net sales growth in the quarter, with stronger trends in Essentials and Home than in the third quarter.
  • Non-merchandise sales grew by more than 25 percent, with membership revenue more than doubling from a year ago, Roundel posting double-digit growth, and the marketplace growing by over 30 percent.
  • Same-day delivery powered by Target Circle 360 grew by more than 30 percent.
  • Sales and traffic trends accelerated in the last two months of the quarter.
  • Fourth quarter GAAP EPS was $2.30, including 15 cents of non-recurring business transformation costs. Adjusted EPS of $2.44 was favorable to last year and in line with company expectations.
  • Full-year GAAP EPS was $8.13 compared with $8.86 last year. Adjusted EPS, which excludes non-recurring legal settlement gains and business transformation costs, was $7.57 and in line with company expectations.

“I’m incredibly proud of how our team navigated through a challenging year in 2025, as they focused on serving our guests while positioning our business for profitable growth in 2026 and beyond,” said Michael Fiddelke, chief executive officer of Target Corporation. “Our team is firmly focused on writing Target’s next chapter of growth, rooted in strengthening our merchandising authority, delivering an elevated and differentiated shopping experience, advancing our use of technology, and continuing to serve and invest in our team and communities. Target saw a healthy, positive sales increase in February, serving as an important milestone on our path back to growth this year, and reinforcing my confidence in the momentum we’re building and the future we’re creating together.”

Guidance
The company has the following expectations for 2026:

  • Net sales growth in a range of around 2 percent compared with 2025. This expectation reflects a small increase in comparable sales, with new-store and non-merchandise sales contributing more than one percentage point of growth. The company expects to grow net sales in every quarter of the year.
  • Full-year 2026 operating income margin rate is approximately 20 basis points higher than the 4.6 percent adjusted operating income margin rate in 2025.
  • GAAP and Adjusted EPS of $7.50 to $8.50. Based on the expected timing of certain costs, the company expects Q1 GAAP and adjusted EPS to be flat to up slightly from last year’s adjusted EPS of $1.30, with stronger year-over-year EPS growth expected through the balance of the year.

Operating Results
Fourth-quarter 2025 net sales of $30.5 billion were 1.5 percent lower than in Q4 2024. Fourth-quarter comparable sales decreased 2.5 percent, reflecting a comparable-store sales decline of 3.9 percent and a comparable-digital sales increase of 1.9 percent. Operating income, which includes the impact of non-recurring items, was $1.4 billion in the fourth quarter 2025, a 5.9 percent decrease from $1.5 billion in 2024. Excluding those non-recurring items, adjusted operating income was $1.5 billion, slightly above last year.

The company reported fourth-quarter GAAP earnings per share (EPS) of $2.30 and adjusted EPS of $2.44, compared with GAAP and adjusted EPS of $2.41 in 2024.

Full-year net sales decreased 1.7 percent to $104.8 billion from $106.6 billion last year, reflecting a 2.6 percent decrease in comparable sales partially offset by sales from new stores and growth in non-merchandise sales.

Fourth-quarter operating income margin rate, which includes the impact of non-recurring items, was 4.5 percent in 2025, compared with 4.7 percent in 2024. Excluding those non-recurring items, the adjusted operating income margin rate was 4.8 percent in 2025. Fourth quarter gross margin rate was 26.6 percent, compared with 26.2 percent in 2024, reflecting lower inventory shrink, lower supply chain and digital fulfillment costs, and growth in advertising and other revenues, partially offset by the net impact of merchandising activities, including higher product and import costs.

Full-year operating income, which includes the impact of non-recurring items, of $5.1 billion in 2025 declined 8.1 percent from $5.6 billion last year. Full-year gross margin rate was 27.9 percent, compared with 28.2 percent in 2024, reflecting pressures from merchandising activities, driven primarily by higher markdowns and purchase order cancellation costs, and pressure from category mix, partially offset by lower inventory shrink and growth in advertising and other revenues.

GAAP EPS was $8.13 and adjusted EPS was $7.57 for full-year 2025, compared with GAAP and adjusted EPS of $8.86 in the prior year.

Fourth quarter SG&A expense rate, which includes the impact of non-recurring items, was 19.9 percent in 2025, compared with 19.4 percent in 2024. Excluding those non-recurring items, the adjusted SG&A expense rate was 19.6 percent in Q4 2025. Full-year SG&A expense rate, which includes the impact of non-recurring items, was 20.6 percent in 2025, compared with 20.6 percent in 2024. Excluding those non-recurring items, the adjusted SG&A expense rate was 20.9 percent in 2025. Both periods reflect the deleveraging impact of lower sales, partially offset by disciplined cost management, as adjusted SG&A expense dollars were lower than in 2024.

Interest Expense and Taxes
The company’s fourth-quarter 2025 net interest expense was $99 million, compared with $90 million in the prior year. Full-year 2025 net interest expense was $445 million, compared with $411 million in 2024. For both the fourth quarter and the full year, the increased expense reflects higher average debt levels in the current year.

Fourth quarter 2025 effective income tax rate was 20.1 percent, compared with 21.5 percent last year, reflecting the benefit of additional tax credits in the current year. The company’s full-year 2025 effective income tax rate was 22.3 percent compared with 22.2 percent in 2024, reflecting higher discrete tax expenses and higher global tax minimums, primarily offset by the benefit of additional tax credits in the current year.

Capital Deployment and Return on Invested Capital
The company paid dividends of $516 million in the fourth quarter, up from $513 million last year, reflecting a 1.8 percent increase in the dividend per share, partially offset by a lower average share count.

The company did not repurchase any shares in the fourth quarter. As of the end of the fourth 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 fourth quarter 2025, after-tax return on invested capital (ROIC) was 13.8 percent, compared with 15.4 percent for the twelve months through fourth quarter 2024. The tables in this release provide additional information about the company’s ROIC calculation.

Image courtesy Target