Target Just Reported Its 13th Consecutive Quarter of Falling Sales, But CEO Michael Fiddelke Says He Has a Plan to Turn Things Around. 2 Key Things For Investors to Know.

Core Insights - Target's fourth-quarter earnings report showed a decline in comparable sales by 2.5% and an overall revenue decrease of 1.5% to $30.5 billion, aligning with estimates, despite a slight improvement in gross margin from 26.2% to 26.6% due to reduced inventory shrink and lower supply chain costs [2][4] - The company reported adjusted earnings per share (EPS) of $2.44, surpassing the consensus estimate of $2.16, up from $2.41 in the previous year [2] Financial Performance - Comparable sales fell by 2.5% and total revenue decreased by 1.5% to $30.5 billion, matching market expectations [2] - Gross margin improved from 26.2% to 26.6%, attributed to lower inventory shrink and reduced supply chain and digital fulfillment costs [2] - Adjusted EPS increased from $2.41 to $2.44, exceeding the consensus estimate of $2.16 [2] Future Guidance - Target anticipates a return to growth in comparable sales by 2026, projecting a 2% increase in net sales alongside a small rise in comparable sales [4] - The company expects adjusted EPS to range between $7.50 and $8.50, compared to $7.57 in 2025 [4] Strategic Initiatives - Target is focusing on non-merchandise sales, similar to Walmart and Amazon, through its Roundel media network and a paid subscription service, Target Circle 360, which offers unlimited free same-day delivery on orders over $35 [5][6] - Non-merchandise sales grew over 25% in the fourth quarter, with membership revenue more than doubling and e-commerce marketplace growth exceeding 30% [6] - The company expects non-merchandise sales to contribute over one percentage point to growth in 2026, representing high-margin revenue [6] Management Focus - New CEO Michael Fiddelke is prioritizing the improvement of Target's reputation, which has suffered due to political controversies, and aims to refocus on in-store operations and customer experience [7] - Target plans to lay off 1,800 employees while increasing investment in store labor to address issues like long checkout lines and stock shortages, raising capital expenditures from $4 billion to $5 billion [9]