Same-store sales dipped year over year. Guidance looked for the pullback to continue, although there has been a slight bounce across categories, measured in terms of sequential quarters.
Additionally, after a decade at the helm of the firm, CEO Brian Cornell will step down in February to be succeeded by Chief Operating Officer Michael Fiddelke.
Digital Sales and Tech Investments
Target said in an earnings press release Tuesday that traffic improved from the first quarter of this year. Digital sales continued to show positive momentum, as measured year on year, up 4.3%, borne aloft by 25% gains in same-day delivery. Digital sales now account for 18.9% of the consolidated sales, up from 17.9% last year. Still, that was a slowdown from the 8.7% gains that were seen last year in the same quarter.
Shares dipped 7.9% in intraday trading Wednesday.
Overall, the number of transactions slid by 1.3%, while the transaction amounts also declined, by 0.6%. Consolidated comparable sales fell by 1.9%. Looking ahead, the firm sees a low-single-digit sales decline for the year.
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Cornell said on the call that “while we expect this year’s [profits and losses] will reflect some short-term pressure from tariffs, we expect to end the year in a healthy position and move beyond this period of uncertainty in 2026.”
Fiddelke said during his remarks: “I know we’re not realizing our full potential right now, and so I’m stepping into the role with a clear and urgent commitment to build new momentum in the business and get back to profitable growth. [W]e’re taking a clear-eyed approach to the work in front of us to understand where we need to lean in and where we need to accelerate change.”
Part of that strategy lies with continued investment in digital operations, he said.
“We’ve started redesigning large cross-functional processes, like how our teams build our merchandising and inventory plans to clarify roles and access the right data to make more effective decisions,” he said. “…[B]y leveraging AI and other tools, our team can build and update forecasts more accurately while spending less time creating them. So, we’re investing to deploy the power of AI more fully across our team, freeing them up to spend more time bringing joy to our guests.”
Beauty Is a Bright Spot
Chief Commercial Officer Rick Gomez told analysts on the call that the comp sales decline was a two-percentage-point improvement over the first quarter levels.
During a discussion of product categories, Gomez said that while beauty sales were down slightly, “we did see many bright spots throughout the assortment. In our core beauty assortment, which represents more than 95% of our total beauty sales, we saw notable strength in skin, bath and hair care categories, which all grew low single digits.”
“While a lot of the season is still ahead of us, both back to school and back to college are off to encouraging starts,” he added.
Asked on the call about the impact of tariffs and corresponding price increases, Gomez said: “We are employing several different strategies, including diversifying country of production, in some cases, evolving our assortment… And then, of course, we’re continuing to negotiate with our partners to ensure that we are offering everyday good value to the consumer. What we’ve said and continues to be our position is that we will take price as a last resort.”
Remarking on consumer demand, Gomez said that “what’s driving some of the acceleration that we’re seeing across all six of our major lines of business … [starts] with discretionary. Our discretionary business saw a 400-basis improvement from Q1 to Q2.”
There was increased demand for women’s denim and core beauty, he said.
Chief Financial Officer Jim Lee told analysts that in looking at the single-digit declines projected for the year, “given that there’s still quite a bit of runway left for the year and a lot of heightened uncertainty on with consumers and tariff uncertainty, we thought it was more prudent just to take a cautious approach and maintain that guidance.”
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