Target (TGT) stock is down nearly 9.6% in pre-market trading despite reporting better-than-expected second-quarter results this morning. Shareholders are reacting negatively to the announcement that long-time executive and current COO Michael Fiddelke has been appointed as the next CEO.
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Fiddelke will take over as CEO on February 1, 2026, when current CEO Brian Cornell steps down and transitions to the role of executive chair of the board.
Target Beats Q2 Expectations
The American big-box retailer saw its sales fall by 0.9% year-over-year to $25.21 billion, but surpassed analysts’ consensus of $24.9 billion. Similarly, adjusted earnings of $2.05 per share beat the consensus estimate of $2.04 per share, but were significantly lower than prior-year period’s figure of $2.57 per share.
The sales decline was driven by a 1.2% year-over-year drop in merchandise sales, partially offset by a 14.2% increase in non-merchandise sales. Non-merchandise sales include advertising income and profit-sharing from credit card partnerships.
Comparable sales fell 1.9% compared to Q2 FY24, reflecting a 3.2% decline in comparable store sales, which was partially offset by a 4.3% increase in digital sales.
Target had anticipated higher markdowns and tariff-related costs would weigh on margins. However, disciplined cost management helped offset some of the pressure. Meanwhile, Target continues to pay a quarterly dividend of $1.14 per share, reflecting an above-industry average current yield of 4.29%.
Target Maintains Fiscal Year 2025 Outlook
Interestingly, Target did not revise down its full-year fiscal 2025 guidance despite ongoing challenges, including weak merchandise trends, staffing difficulties, and softer in-store traffic. The company reiterated its forecast for a low single-digit sales decline in FY25 and projected adjusted earnings between $7.00 and $9.00 per share. For comparison, Wall Street estimates a 1.5% decline in FY25 sales and adjusted EPS of $7.28.
Looking ahead, Cornell stated, “As we enter the critical back-to-school and holiday seasons, our team remains focused on consistent execution and building momentum as we look ahead to the new year.”
Is TGT Stock a Buy, Hold, or Sell?
On TipRanks, TGT stock has a Hold consensus rating based on 12 Buys, 16 Holds, and four Sell ratings. The average Target price target of $103.40 implies 1.9% downside potential from current levels. Year-to-date, TGT stock has lost 19.6%.
Please note that these ratings were issued before the Q2 results and may change once analysts revisit them.
