As Target kicked off the first major wave of big retailer earnings, the company highlighted a rebound in demand after three consecutive quarters of negative comparable sales. In reporting results for the three months ended May 2, Target said comparable sales rose 5.6%, its largest increase in four years and its first positive read after a streak of declines.
The sales strength came alongside earnings that beat expectations. Target posted first-quarter earnings of $781 million, or $1.71 per share, for the period ended May 2, topping what analysts expected, according to FactSet. The company also said net sales rose 6.7% to $25.44 billion, again exceeding expectations.
Target also pointed to early momentum across its business. The company said customers spent money across its main merchandising categories, and it cited a “strong guest response so far,” while indicating it has more work underway. CEO Michael Fiddelke, who became CEO in February, said he remained guardedly optimistic given the company’s operational overhaul, and he told investors that Target is maintaining a cautious outlook.
“We’re encouraged to see a strong guest response so far,” Fiddelke said, adding: “We’re maintaining a cautious outlook given the work we know we have in front of us and ongoing uncertainty in the macroeconomic environment.”
Target’s guidance reflected that tension between a near-term sales improvement and a still-cautious view of the rest of the year. The retailer lifted its annual revenue outlook, but the updated sales expectations still came in below the pace of the first quarter, and shares fell 5% on Wednesday. Target said it now expects net sales growth to be up 4% for the year, versus its previous forecast of 2%, which would put sales at $108.97 billion. For the full year, Target said it expected earnings per share near the high end of $7.50 to $8.50—guidance offered in March.
Target’s turnaround efforts, which have included store changes and organizational reshuffling, have been closely watched by investors and analysts. In March, Fiddelke unveiled a $6 billion plan aimed at reversing three straight years of sales declines. Target said it plans to remodel stores as part of an effort to reclaim its appeal in apparel and other categories, while also improving staffing and worker training.
The company also cited specific merchandising moves it said resonated with shoppers, including new collaborations with labels such as Roller Rabbit, an apparel and home goods brand known for whimsical, block-print designs. Target said those collaborations have been among the factors supporting the improved sales trend in the quarter.
Still, analysts cautioned that the evidence of a full turnaround may take time to solidify. Neil Saunders, managing director of GlobalData Retail, wrote that the results “represent an early win for Michael Fiddelke and his team,” but Saunders also said Target’s lackluster sales had more to do with execution than broader cultural crosshairs such as DEI. Saunders wrote that failing on execution had been a more central issue, even as he acknowledged DEI’s relevance to some of the debate around the company.
Target’s earnings also surfaced an ongoing question among retailers about how consumer behavior is shifting amid higher prices and other macroeconomic pressures, including what the company described as uncertainty tied to the Iran war and its downstream effects. The AP report said Target is among the first big retailers to post financial results, a timing that can help set the tone for how the rest of the retail sector is likely to perform.
The company’s challenges predated the current CEO, according to the AP report. Customers had complained about disheveled stores and a lack of the fashionable yet affordable niche that earned Target the nickname “Tarzhay.” The report also said Target’s decision to roll back diversity, equity and inclusion initiatives led to protests and boycotts, and it pointed to another flashpoint involving federal immigration enforcement in Minneapolis earlier this year. In an AP interview in early March, Fiddelke acknowledged that boycotts had taken a toll, but he said the first-quarter increase in store traffic was broad-based.
As Target continues executing its overhaul, the immediate results provide a measure of improvement in comparable sales—while the outlook and market reaction suggest investors still want more clarity on how quickly the changes will translate into sustained growth. The retailer’s stock slide on Wednesday underscored that balance: a quarter with stronger-than-expected results still faced a cautious forecast and uncertainty about the consumer environment.