Confidence is waning at big-box retailer Target according to recent quarterly results.
Target Corp. CEO Brian Cornell is under increasing scrutiny after the company lowered its sales outlook, citing weaker consumer spending, tariff impacts, and backlash from recent boycotts.
The disappointing update sent shares tumbling and sparked renewed doubts about Cornell’s ability to revive growth, particularly amid growing economic uncertainty.
“It’s a great brand and a great company—it just looks like it needs new leadership,” said Bill Smead, chief investment officer at Smead Capital Management, a longtime shareholder.
Smead criticized current leadership for missteps in navigating political and cultural flashpoints, such as the controversy over Target’s 2023 Pride collection and the backlash following its recent retreat from diversity initiatives. These decisions, he said, have alienated parts of the customer base and hurt the business.
On January 24, days into Donald Trump’s presidency, Target announced it was eliminating hiring goals for minority employees. This ended an executive committee focused on racial justice and making other changes to its diversity initiatives.
Target said it had a new strategy called “Belonging at the Bullseye” and the company remained committed to “creating a sense of belonging for our team, guests and communities.” Target also stressed the need for “staying in step with the evolving external landscape.”
But the decision upset many consumers leading to a 40-day consumer boycott during Lent led by Rev. Jamal Bryant, a prominent Atlanta-area megachurch pastor, over its DEI rollback. Protestors picketed outside Target headquarters in Minneapolis and other Black leaders such as Rev. Al Sharpton supported boycott efforts.
Target came under more pressure than other companies that rolled back DEI policies.
Instead of getting caught up in social debates, Smead believes Target should double down on operational strengths and sharpen its execution during tougher economic times.
Cornell, who agreed to stay on as CEO through 2025, now faces intensified pressure after the company forecasted a low single-digit decline in annual net sales, down from a previously expected 1% increase. Comparable sales fell 3.8% in the quarter ended May 3—worse than anticipated—as fewer customers shopped and those who did spent less per visit.
Cornell joined as the top executive of Target over ten years ago and streamlined the retailer’s operations. He led the company through the pandemic but since then the company hasn’t generated substantive growth.
“We’re not satisfied with these results,” Cornell told reporters. “We need to bring traffic back to our stores and digital platforms.”
“We faced several additional headwinds this quarter, including five consecutive months of declining consumer confidence, uncertainty regarding the impact of potential tariffs, and the reaction to the updates we shared on [DEI] in January,” Target CEO Brian Cornell said on a call with analysts Wednesday.
Cornell warned of “massive potential costs” from tariffs, but said the retailer could offset them by diversifying suppliers, adjusting products – and hiking prices, if necessary.
“We have many levers to use in mitigating the impact of tariffs and price is the very last resort,” he said.
Sheraz Mian, director of research at Zacks Investment Research, said the key issue now is whether investors still believe in Target’s turnaround strategy. The company has reported declining revenue in five of the past eight quarters and has lagged behind competitors in adapting to shifting consumer behavior.
Rival Walmart Inc. has made strategic gains by investing in lower prices, enhancing its product selection, and remodeling stores—moves that have helped it win over higher-income shoppers, once a Target stronghold.
“We think it will be more difficult for Target in this environment given tariffs and Walmart’s substantial market-share gains,” remarked Jefferies analyst Corey Tarlowe.
Executives at Target are aware that the company isn’t delivering.
“We recognize that we’ve got to make sure each and every day, we deliver the right products, the right assortment, the right value that brings guests into our stores and our digital sites,” Cornell said.
In the midst of slow sales, Target made some management changes. According to the company, these changes will improve performance.
Chief Strategy and Growth Officer Christina Hennington, a Target veteran of more than 20 years and who was looked at as a potential successor to becoming CEO, has left the company.
Chief Operating Officer Michael Fiddelke will lead a newly formed group called the “multiyear acceleration office,” aimed at positioning Target to move faster on growth priorities. Target will also double down on offering trendy, affordable products and convenient shopping experiences, executives said on a call with analysts.
Cornell said Target’s culture and commitment to staff has not changed.
“I recognize that silence from us has created uncertainty, so I want to be very clear: We are still the Target you know and believe in,” Cornell said.
Target’s stock dropped as much as 7.7% following the report and is down about 27% year-to-date. This is in contrast to a 1% gain in the S&P 500.
Pump Radar
Stock Alerts