Target issues stark warning on tariff impact following solid Q4 earnings

Target Corp. posted better-than-expected fourth quarter earnings Tuesday, but warned customers that price increases from tariffs put in place by President Donald Trump will likely arrive within the coming days.

Target  (TGT)  said adjusted earnings for the three months ending on Feb. 3 were pegged at $2.41 per share, a 20% decrease from the same period last year but firmly ahead of Wall Street's consensus forecast of $2.26 per share.

Group revenues, Target said, fell 3% to $30.92 billion, just ahead of analysts' estimates of a $30.82 billion tally. Same-store sales rose 1.5% from a year earlier, topping the Refinitiv forecast of 1.2%, while digital sales were up 10.8%.

Gross profit margins narrowed by around 50 basis points to 26.2%, thanks in part to heavy holiday discounting that lowered overall transactions by around 0.6%.  

Looking into the current financial year, Target said it sees comparable sales that are largely flat to 2024 levels, with a wide earnings range of between $8.80 to $9.80 per share.

"As we look ahead, our continued investments in digital capabilities, stores and supply chain—combined with a focus on newness, value, speed and reliability—will further differentiate our one-of-a-kind physical and digital shopping experience," said CEO Brian Cornell.

"Consumers continue to be drawn to the everyday discovery and delight that only Target can deliver, and we're committed to leveraging our strategy, scale and unique position in retail to build on this distinct competitive advantage and drive long-term profitable growth," he added.

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Cornell also told CNBC that while Target has diversified its supply chain over the past few years, he still expects price increases on a range of goods "over the next couple of days" following the introduction of tariffs on goods from key U.S. trading partners. 

Finance chief Jim Lee also noted that consumer spending trends were starting to softening following a record Valentines Day performance for the group, thanks in part to "uncharacteristically cold weather across the U.S. affected apparel sales, and declining consumer confidence".

“Looking ahead, we expect to see a moderation in this trend as apparel sales respond to warmer weather around the country, and consumers turn to Target for upcoming seasonal moments such as the Easter holiday," Lee added. "We will continue to monitor these trends and will remain appropriately cautious with our expectations for the year ahead.” 

More Economic Analysis:

• Retail sales tumble in January, testing Fed rate cut forecast
• CPI inflation shock hammers Fed rate cut bets for 2025
• Rate cuts and tariffs will weigh on economic reports

Last month, Walmart  (WMT)  topped Street forecasts in its fourth quarter update, but issued a muted near-term sales and profit outlook tied to tariff and inflation risks.

Target shares were marked 3.9% higher in premarket trading immediately following the earnings release to indicate an opening bell price of $125.45 each.

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