Target posts lower 2025 earnings as Q4 sales dip

Core Viewpoint - Target Corporation reported weaker profitability for the 2025 financial year, with a modest decline in Q4 sales despite growth in several product categories and non-merchandise revenue lines [1] Group 1: Financial Performance - Net sales for Q4 declined 1.5% to $30.45 billion from $30.91 billion in the prior-year period [1] - Comparable sales fell 2.5%, driven by a 3.9% drop in comparable store sales, partially offset by a 1.9% increase in comparable digital sales [1] - Net earnings decreased 5.2% to $1.04 billion from $1.10 billion year-on-year [2] - Basic earnings per share fell 4.4% to $2.31, while diluted EPS declined 4.5% to $2.30 [2] - Operating income reached $1.38 billion, down 5.9% from $1.46 billion a year earlier, with an operating income margin rate of 4.5% compared to 4.7% in 2024 [2] Group 2: Margin and Revenue Insights - Quarterly gross margin improved to 26.6%, up from 26.2% in the prior year, supported by reduced inventory shrink and lower supply chain costs [3] - Non-merchandise revenue rose by over 25%, driven by a doubling of membership income year-on-year and significant growth in the Roundel advertising business and marketplace [4] - Same-day delivery through Target Circle 360 increased by more than 30% [4] Group 3: Future Outlook - For the full year, net sales declined 1.7% to $104.78 billion from $106.56 billion in 2024, reflecting a 2.6% drop in comparable sales [4] - The company anticipates net sales growth of around 2% in 2026 and expects its full-year operating income margin rate to be 20 basis points higher than the 4.6% adjusted operating margin recorded in 2025 [5]