Transformation is showing initial results! Target Corporation (TGT.US) 2026 fiscal year profit guidance exceeds expectations. Sales expected to recover growth after three consecutive years of decline.

US retail giant Target Corporation (TGT.US) has announced better-than-expected profit guidance for the fiscal year 2026, and expects to return to growth in sales after three consecutive years of decline, showing that its transformation plan is working. Target Corporation expects adjusted earnings per share for the fiscal year 2026 to be between $7.50 and $8.50, with the midpoint of $8.0 higher than analysts' consensus expectation of $7.63. The company also projects that net sales for fiscal year 2026 will increase by about 2% compared to fiscal year 2025, and added that it expects net sales to grow in every quarter of the year. Boosted by this news, as of the time of the announcement, Target Corporation's US stock rose nearly 4% in pre-market trading on Tuesday. At the same time, data released by Target Corporation shows that in the fourth quarter of fiscal year 2025 ending on January 31, the company's sales decreased by 1.5% year-on-year to $30.45 billion, slightly below analysts' consensus expectation of $30.5 billion; comparable sales declined by 2.5%, slightly higher than the market's expectation of 2.4%. Operating profit was $1.38 billion, down 5.9% year-on-year; adjusted earnings per share were $2.44, beating the market expectation of $2.15. The strong profit guidance demonstrates the progress Target Corporation has made in improving its performance. The company aims to end its long sales slump by investing in improving products, renovating stores, and integrating new technologies into its operations. However, with consumers becoming increasingly price-sensitive, the company also needs to fend off competition from competitors. In the past few decades, Target Corporation has been known for promoting "cheap chic" across America, but after a prosperous period during the pandemic, the company has been struggling. Weak performance has caused a crisis within this long-standing retailer, leading to a loss of market share. One key challenge is that households are spending less on home decor and other discretionary items which are Target Corporation's core categories while prioritizing the purchase of lower-priced essentials. The retailer has a relatively small exposure in the grocery field, with related sales accounting for less than a quarter of its total. Additionally, its higher proportion of imported goods makes it more susceptible to disruptions from tariffs. New CEO Michael Fiddelke, who previously served as Chief Operating Officer of Target Corporation, took over as CEO of this retail giant in February this year. In his first month as CEO, Fiddelke restructured the management team, with two senior executives leaving and around 500 positions being eliminated. Target Corporation also added two directors, with the former CEO Brian Cornell serving as chairman of the board. Fiddelke admitted during a company-wide meeting with employees after becoming CEO that the company had lost the trust of some customers and employees, and he promised to rebuild that connection. He stated that the company will focus on key categories and create a unique product mix and shopping experience. Target Corporation's sense of urgency also stems from the fact that Walmart Inc. (WMT.US), which has also recently welcomed a new CEO, is continuously attracting more affluent consumers. Meanwhile, Costco Wholesale Corporation (COST.US) is also growing, with its Kirkland private label brand and warehouse membership model gaining consumer favor. There have been some improvements in certain areas of Target Corporation's business in recent months. Its beverage section has performed better thanks to new product launches; categories such as toys, video games, and sporting goods have also seen a rebound. In Target Corporation's stores, the company is promoting friendlier service from employees. Target Corporation saw an acceleration in foot traffic and sales in December last year and January this year. In the most recent quarter, sales of food, beverages, beauty, and toys performed well. Fiddelke stated on Tuesday, "Target Corporation achieved healthy and positive sales growth in February, which is an important milestone for us to return to growth this year, and it strengthens my confidence in the momentum we are building and the future we are creating together." Nevertheless, this retailer still has much work to do in winning back consumers. Neil Saunders, managing director of GlobalData, commented in a report to clients on Tuesday, "The forward guidance has improved somewhat. Although these growth forecasts are reasonable, they are still below the overall market growth rate, reflecting the fact that the corrective actions will take some time to take effect." In addition, amidst the US President Trump's crackdown on immigration focusing on Minnesota, triggering protests, and the killings of two Americans by federal law enforcement, Target Corporation finds itself in the midst of turmoil. Immigration officials briefly detained two Target Corporation employees, leading to some store employees taking sick leave and others expressing disappointment that the company did not publicly address the unrest. Target Corporation, along with many other companies based in Minnesota, signed a letter calling for a de-escalation of tensions. Target Corporation is one of the latest retailers to announce quarterly earnings for this reporting season. In recent weeks, consumer-facing companies have painted a picture of American consumers they still value cost but are willing to purchase items with good value or uniqueness. Retailers indicate that they are evaluating the impact of the Supreme Court's ruling on global taxation.