Target(US:TGT) ZACKSยท2025-09-22 13:35Core Insights - Target Corporation (TGT) reported mixed second-quarter fiscal 2025 results, with adjusted earnings per share falling 20.2% year over year to $2.05 and revenues dipping 0.9% to $25.21 billion, indicating challenges from cautious consumer spending and ongoing tariff-related costs [1] Financial Performance - Comparable sales declined 1.9%, despite improved store traffic and digital demand, reflecting a shrinking average basket size, which signals consumer restraint on discretionary purchases [1] - Gross margin contracted 100 basis points to 29%, primarily due to approximately 210 basis points of pressure from merchandising, including inventory-adjustment costs and tariff-related expenses [2] - Operating margin decreased 120 basis points to 5.2% from 6.4% in the prior-year period, with ongoing tariff-related expenses continuing to impact profitability [3] Future Outlook - Target reaffirmed its full-year fiscal 2025 outlook, predicting a low-single-digit decline in sales and adjusted earnings of $7.00-$9.00 per share, indicating cautious planning amid tariff and consumer uncertainties [4] - The company is investing in operational and merchandising initiatives, including over 10,000 AI licenses to enhance forecasting and inventory accuracy, alongside programs aimed at increasing basket size [5] Market Performance - Target's stock has lost 33.5% year to date, underperforming key peers such as Dollar General Corporation (DG) and Costco Wholesale Corporation (COST), which saw share increases of 37.7% and 5.6%, respectively [6] - Target's forward 12-month price-to-earnings ratio of 11.39 reflects a lower valuation compared to the industry's average of 30.14, indicating a discount relative to peers [7] Earnings Estimates - The Zacks Consensus Estimate for TGT's fiscal 2025 earnings implies a year-over-year decline of 15.5%, while the estimate for fiscal 2026 indicates growth of 8.9%, with recent upward adjustments in earnings estimates for both fiscal years [10]