Introduction
Target reported another holiday quarter of declining revenue and store traffic, but the retailer’s shares rose after it topped earnings expectations and said sales momentum improved late in the quarter. The results were the company’s first since Michael Fiddelke became CEO on Feb. 1, and they arrived alongside an investor meeting in Minneapolis where management outlined steps to end a multi-year sales slump. Target is projecting a return to growth in 2026, supported by store investments, supply chain upgrades, and expanding nonmerchandise revenue streams.
Holiday Quarter Results: Revenue Down, Earnings Beat
For the fiscal fourth quarter, Target reported adjusted earnings per share of $2.44, above the $2.16 expected by analysts. Revenue came in at $30.45 billion, slightly below expectations of $30.48 billion, and down about 1.5% from the year-ago period. Net income for the quarter slipped to $1.05 billion from $1.10 billion a year earlier, while adjusted results reflected offsets such as legal settlement gains and transformation costs.
Traffic and Comparable Sales Remain a Headwind
Target said customer traffic fell for the fourth consecutive quarter across stores and digital channels. Comparable sales declined 2.5% year over year, driven by a 3.9% drop in comparable store sales, partially offset by a 1.9% increase in digital comparable sales. Total transactions fell 2.9%, while average transaction size rose 0.4%, suggesting fewer visits but slightly higher spend per trip.
Fiddelke Points to February as an Early Positive Signal
Management said sales and traffic trends improved in the final two months of the holiday quarter and that sales turned positive year over year in February, the first month of the current quarter. Fiddelke cautioned that one month does not establish a durable trend, but said the February improvement supports confidence that Target can return to growth.
2026 Outlook: Modest Sales Growth and Higher Investment
For the current fiscal year, Target expects net sales to rise about 2% versus the prior year and said it anticipates growth in every quarter. The company expects a small increase in comparable sales, with more than 1 percentage point of growth coming from new stores and nonmerchandise revenue such as advertising and membership. Target guided to full-year adjusted EPS of $7.50 to $8.50, compared with $7.57 in adjusted EPS for the most recent full year.
Target’s CFO said capital expenditures will total about $5 billion this fiscal year, more than $1 billion higher than last year. Spending will focus on supply chain, technology, and stores, including plans to open more than 30 new stores and remodel more than 130.
Strategy Focus: Style, Store Experience, and Digital Growth
Target is aiming to rebuild its reputation for design-driven merchandising and improve the in-store experience after customer complaints about out-of-stocks, long lines, and store conditions. The company has increased investment in store labor and has also reduced staffing in some corporate and operational areas, including prior job cuts. Management said it is focused on delivering stronger product and a better shopping experience, while acknowledging that discretionary demand remains pressured by higher costs for essentials.
Nonmerchandise Revenue Becomes a Bigger Growth Engine
Target’s nonmerchandise sales rose more than 25% in the quarter, supported by membership revenue that more than doubled year over year, double-digit growth in its advertising business Roundel, and more than 30% growth in its third-party marketplace. Same-day delivery through Target Circle 360 grew more than 30% year over year. The subscription service is priced at $99 per year or $10.99 per month.
Conclusion
Target’s holiday quarter results show continued pressure on traffic and revenue, but stronger earnings and signs of improving sales trends have lifted investor sentiment. The company is betting that heavier investment in stores, supply chain, and technology, combined with a larger contribution from ads and membership, can restore growth in 2026. The key test will be whether Target can convert improving momentum into sustained traffic gains and stronger comparable sales while consumers remain cautious on discretionary spending.