Here's why Target's turnaround may not be as smooth as the latest results imply

By Bill Peters

Target tops earnings expectations and boosts its outlook, but its shares fall Wednesday

Target has been remodeling stores and store displays to stand out among its rivals, as consumers remain cautious.

Target's turnaround efforts include everything from redesigned shopping carts to a "concierge" service for baby products. But the retailer's optimism about those plans has run up against skepticism from investors, who sent shares lower on Wednesday.

Target (TGT) on Wednesday raised its sales outlook for the year as shoppers gravitate toward its refreshed wellness, beauty and baby sections. And it reported first-quarter results that were better than Wall Street's expectations.

However, Target executives and Wall Street analysts noted that consumers were still cautious and said the company was facing tougher comparisons for the year ahead - as well as steeper expectations from investors.

Shares of Target fell 3.9% on Wednesday. The move lower followed stock gains of more than 20% so far this year for the chain, after investors bet on a big rebound following shakier sales trends over the past few years.

Brian Mulberry, chief market strategist at Zacks Investment Management, told MarketWatch over email that those stock gains for Target had already priced in better results, "which means the beat needed to be followed up by a stronger raise in forward guidance."

He said Target's turnaround appeared to be working, but that it needed to "move on from triage to full-scale growth."

Roth analyst Bill Kirk, in a note on Wednesday, said that while Target put up strong first-quarter results, those results reflect a period before the Iran war drove up gas prices and made it more difficult for consumers to spend on items they want.

"With tougher compares and higher fuel prices, Target's performance may decelerate, as is implied in Target's guidance," he said.

Getting its style back

The company issued the results and forecast as it tries to get its style back - for its clothing, stores and store brands - and as its new CEO, Michael Fiddelke, works to sell investors on its progress. The chain has struggled to find its place in the retail universe, as a higher cost of living sends shoppers to rivals like Walmart (WMT) that are more focused on lower prices and essentials.

During a call with reporters, Fiddelke noted that consumers remain hesitant as the Iran war drives up prices for gas, clothing and the materials that go into the products on retailers' shelves. And he cautioned that some of Target's efforts to win back consumers would work, and some wouldn't.

"We're only a quarter into this year," Fiddelke said, later adding: "We want to be careful not to get out over our skis."

Target said it expects sales growth of around 4% for 2026, 2 percentage points higher than its prior outlook. It expects adjusted earnings per share to be "near the high end" of earlier expectations for $7.50 to $8.50.

For the first quarter, Target's sales were up 6.7% year over year to $25.44 billion, above estimates for $24.66 billion. Target reported adjusted earnings per share of $1.71, topping analysts' expectations for $1.47.

Same-store sales rose 5.6%, above estimates for a 2.4% increase. That was the fastest growth rate in four years. It also snapped a four-quarter streak of declines.

During the media call, Fiddelke said the company was seeing "consistency" among higher-income consumers, who are still shopping and spending, and lower-income consumers, who have pulled back in response to price increases over the past several years. But he said more consumers, overall, had dropped by a Target store in the first quarter.

The company in March said it would lower prices on 3,000 spring-season products. It has also rolled out new sections for upscale baby products at around 200 stores, as well as a "concierge" service for parents seeking specific advice. Target also plans introduce an updated beauty section focused on more premium offerings at several hundred stores in the fall.

Makers and sellers of clothing and sneakers have churned out new products in recent months in an effort to reignite demand, and retailers over the years have taken steps to make their physical stores more welcoming. Target, whose own stores have sometimes been accused of being messy or lackluster, has more than 100 store remodels under way as it tries to find ways to stand out to customers focused on lower prices.

Fiddelke told reporters that style and design need to be at the center of how management thinks about Target overall.

"Even the smallest touches, like a shopping cart - it's got a place for a couple of drinks and the ability to throw a toddler along for the ride for that Target run with you," he said.

-Bill Peters

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05-20-26 1632ET