Target Sets $1 Billion Plan to Reverse Falling Sales
Synopsis
Target said comparable sales fell 2.7 per cent in third quarter, worse than expected. New CEO Michael Fiddelke who takes over in February plans to spend $1 billion in 2026 on new stores, remodels and digital improvements. The company cut 1,800 corporate jobs last month. Target lowered top end of its annual earnings forecast and gave a wide range for holiday quarter profits. Retailer cut prices on 3,000 items and introduced a cheaper Thanksgiving meal to attract cash-strapped consumers. Stock is down 35 per cent this year.
On Wednesday, Target reported that sales dropped more than analysts had expected. The company also gave a wide range of possible profits for the holiday shopping quarter. Target has cut prices and invested money in trying to attract American shoppers who have less money to spend. In morning trading, shares of the Minneapolis retailer fell slightly. So far this year, the stock has lost nearly 35 per cent of its value.
New Boss to Take Over in February
Results show the first full quarter since Target named Michael Fiddelke as its new chief executive officer in August, during which sales declined for three straight quarters. So, Target said it plans to spend about $1 billion more in 2026, with the money going to new stores, fixing up old stores and improving its digital business.
Fiddelke also discussed other plans to turn Target around following the earnings report. He starts in the top job in February. The company is testing a new operating model across 35 markets. This is how stores process online orders. Under the new model, the chain will pick and pack online orders in only some stores. Other stores will no longer do the work at all.
He also discussed efforts to make shopping better. In stores, digital tools are being brought in to accelerate jobs such as unloading and stocking. Freeing up team members would allow them to help the customers. Online, Target has implemented an AI-powered gift finder for the holiday season. The company is also using machine learning to improve forecasting and position inventory. That made the top 5,000 items more available, said Fiddelke.
1,800 Job Cuts Last Month
These actions come after Fiddelke moved last month to eliminate 1,800 corporate jobs. Michael Baker is an analyst with D.A. Davidson. He said that it's much too early to expect to see any meaningful changes in these results from the incoming new CEO. Fiddelke does not fully take over until the start of the next fiscal year. But in this quarter, we did see some decisive action from him, Baker said.
Results at Target came days after the longest US government shutdown in history delayed federal pay and food stamp benefits. That upset consumers. High inflation and tariff worries are other things that have forced consumers to pull back on spending.
These factors had an impact on Target's results. Total comparable sales from online channels and stores open for at least 13 months fell 2.7 per cent in the third quarter. Estimates had been for a 2.08 per cent drop according to LSEG. Shares were down 2.1 per cent.
Other Stores Also Struggling
Other losers included home improvement chains Home Depot and Lowe's, which reduced annual expectations this week due to the still-silent housing market. At the other end of the spectrum, off-price retailer TJX made its name selling branded merchandise for cheap. It raised its annual profit target.
Walmart reports on Thursday, and is expected to be another winner from the consumer slowdown. Its focus on cheap groceries and household basics has helped. So, too have investments in technology to deliver those items quickly to customers' doorsteps. Walmart has taken market share from Target, according to UBS analyst Michael Lasser.
Target has been reporting a quarterly comparable sales drop for five successive quarters. A weaker consumer, along with merchandising issues, has hurt the company, while Walmart posts healthy growth due to lower prices.
Company Slashing Prices to Attract Shoppers
Growing economic pressures led to multiple forecasts of a weak holiday shopping season this year. In a bid to entice frugal shoppers, Target in November cut the prices of 3,000 everyday items, including food and household staples. The company also brought out a cheaper Thanksgiving meal kit.
Target said it earned $1.78 a share in the three months ended on November 1st, beating expectations of $1.72. Total revenue fell 1.6 per cent to $25.27 billion, just shy of estimates. The company is in for hard times. Americans are spending less; they are worried about money. Things got even worse when the government shut down. People did not get their paychecks on time. Food stamp benefits were late. This left many families with less money to shop.
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