Target Corporation (Target (TGT)) shares slipped Wednesday even after the retailer reported first-quarter results that beat Wall Street estimates and raised its full-year sales outlook. Investors instead focused on management's cautious tone about the near-term environment.
The retailer reported first-quarter adjusted earnings of $1.71 per share, easily topping the analyst consensus of $1.46. Sales rose 6.7% year over year to $25.44 billion, ahead of the $24.64 billion Street estimate.
Comparable sales increased 5.6% in the quarter, with broad-based growth across merchandise categories and sales channels. Comparable traffic rose 4.4% from a year ago. Target said net sales grew across all six core merchandising categories, while digital comparable sales climbed 8.9%, fueled by more than 27% growth in same-day delivery through Target Circle 360. Non-merchandise revenue jumped nearly 25%, driven by higher advertising revenue from Roundel, Target Circle 360 membership fees, and growth in the Target+ marketplace.
“As we look ahead, we’re focused on staying disciplined and flexible in an uncertain operating environment and continuing to invest boldly in our team, capabilities, and an elevated guest experience to unlock our full potential over time,” CEO Michael Fiddelke said.
First-quarter adjusted operating margin improved to 4.5% from 3.7% a year earlier, while gross margin expanded to 29% from 28.2%. Capital expenditures totaled $1 billion during the quarter, up 31% from last year, primarily due to investments in new stores and remodels. The company ended the quarter with $3.53 billion in cash and equivalents.
During the earnings call, management said inventory availability improved year over year, particularly in food, essentials and beauty. Executives also highlighted strong customer response to limited-time partnerships, including Roller Rabbit, Pokémon and BTS launches.
The company said it remains focused on long-term growth and plans to continue investing in its business, workforce and local communities to support expansion beyond 2026. Management added that it is staying flexible as consumers weigh multiple headwinds and tailwinds and consumer sentiment softens.
“While we have momentum, we’re also being cautious about the near-term operating environment,” the company said, adding that it does not want “to swing too hard too quickly, despite the early signs of momentum we’re seeing.”
CFO Jim Lee put it more bluntly: “While consumers have proven to be resilient so far, sentiment has been declining recently.” He also warned that sales comparisons will become more challenging through the remainder of fiscal 2026 after benefiting from easier comparisons in the first quarter.
Target affirmed fiscal 2026 adjusted earnings guidance of $7.50 to $8.50 per share, compared with analyst estimates of $8.14 per share. The retailer also raised its fiscal 2026 sales outlook to a range of $108.45 billion to $109.50 billion from its prior forecast of $106.88 billion. The updated outlook is above the analyst consensus estimate of $107.22 billion.
Target shares were down 4.55% at $121.45 at the time of publication on Wednesday.
