Target is spending an extra $2 billion to refresh stores and tech to bring shoppers back

By Bill Peters

Target's stock surges toward a one-year high on upbeat outlook, as the chain looks to get its 'Tarjay' energy back

Investors cheered Target's quarterly results and outlook, with the stock surging toward a one-year high on Tuesday.

Shares of Target rallied on Tuesday after the big-box retailer laid out plans to breathe new life into its stores and catch up with its bigger tech-focused rivals, following a forecast earlier in the day for a modest sales rebound and better-than-expected profit for this year.

Target (TGT) rolled out those plans - which include $2 billion in additional investments and efforts to refresh its aging lines of home and baby products - during its analyst day on Tuesday, as the chain tries to generate excitement about its new CEO, Michael Fiddelke, who took over last month.

Shares jumped nearly 7% on Tuesday and were trading at around $121. The advance put the stock near its highest close in roughly a year.

The announcements followed weaker sales for Target over the past few years amid an affordability crunch that has made rivals Walmart (WMT), Costco Wholesale (COST) and Amazon.com (AMZN) more popular with shoppers. They also arrived after Fiddelke's appointment was met with some skepticism on Wall Street.

During the analyst day, executives discussed plans to invest an extra $2 billion into the business this year, with hundreds of millions of that going into store-employee training. Other areas of investment include store openings, remodels, marketing, technology and artificial intelligence. The company plans to open more than 30 new stores this year and remodel more than 130.

Target is trying to reignite its reputation as a destination for style and value, refreshing its store displays as well as some of its own store brands in the process. Executives said they would be focused on making stores more fun, leaning into areas where demand is stronger - like gadgets and sports gear - and taking more time to make selections sharper and more relevant.

"Target is not an everything store," Fiddelke said during the analyst event. "That's not what guests want from us."

Chief Merchandising Officer Cara Sylvester said Target had lost its way in its home-goods business and announced plans to overhaul its assortment of things like decorative accessories and bedding. She also said the company would push harder on items related to sports and pop culture, expand its selection of prestige beauty items and introduce revamped, dedicated beauty sections in hundreds of stores.

Elsewhere, she said, the company would launch an array of new wellness items, take steps to make grocery shopping more digital and overhaul its baby-items section. Target's baby-products category, she said, had been "untouched for years."

She also noted occasional complaints from customers about messy stores and inconsistent service.

"We've heard clearly from our guests and from many of you that our in-store experience has been inconsistent," she said. "Too often we're cluttered, out of stock or even transactional."

For the current fiscal year, the retailer said it expects to earn $7.50 to $8.50 a share. The midpoint of that range was well above FactSet's estimate for $7.63.

Target expects sales gains this year of roughly 2% from a year ago, compared with analysts' estimates for growth of around 1.8%. The gains reflect expectations for a slight increase in same-store sales, new stores and gains in "nonmerchandise" sales - or sales from things like Target's digital advertising business, which charges brands to advertise their products within the retailer's online ecosystem.

Management said it expects sales to increase in every quarter of the year. Fiddelke, in a statement, said the chain had a "healthy, positive sales increase in February, serving as an important milestone on our path back to growth this year."

For the year ending Jan. 31, sales declined 1.7% to $104.8 billion, marking a third straight yearly decline.

Higher costs of living have steered shoppers toward groceries and household essentials - areas where retailers like Walmart and Amazon have had the upper hand thanks to their size and their ability to keep prices lower. In the process, customers spent less on the clothing, accessories and home decor that Target depends on.

Analysts have said reviving sales for those categories would be crucial to Target's turnaround. But along with a more selective consumer, the retailer, like the rest of the industry, faces tariff upheaval and questions over refunds, as President Donald Trump doubles down on the global trade war following the Supreme Court's ruling against his use of emergency-powers tariffs. The U.S.-Israeli attacks on Iran have also rattled markets, amid concerns about the impact on the broader economy.

Target's adjusted fourth-quarter earnings per share rose to $2.44 from $2.41, while the FactSet consensus called for a decline to $2.16.

Sales for the latest quarter, which encompassed the key holiday shopping period, were $30.45 billion, down 1.5%, with same-store sales down 2.5%. Analysts were expecting sales of $30.46 billion and a same-store sales decline of 2.4%, according to FactSet.

However, Target said sales and store traffic improved during the last two months of the fourth quarter. Demand for groceries, beauty products and toys helped sales during the quarter, as did gains in membership revenue and digital advertising.

Following Tuesday's gains, Target's stock is now up 3.6% over the past 12 months. Shares of Walmart have soared 33.3% over that period, and the S&P 500 index SPX has advanced about 18%.

Tomi Kilgore contributed.

-Bill Peters

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03-03-26 1647ET