Target has raised concerns about the state of consumer spending in the US, pointing to declining consumer confidence and weaker-than-expected sales in February.
The retail giant reported that sales for the month were “soft,” citing cold weather as a factor affecting apparel purchases, while overall discretionary spending also declined.
Target’s Chief Financial Officer, Jim Lee, attributed the weaker performance to “declining consumer confidence,” adding that the company remains “appropriately cautious” about 2025. While the retailer saw better-than-expected earnings for the fourth quarter, it forecasted a “meaningful” drop in first-quarter profit due to ongoing economic uncertainty, soft sales, and concerns about potential tariff impacts.
The company’s sales declined to $30.92 billion in the fourth quarter, a 3% drop from the previous year, though the comparison was skewed by an extra week in the prior year’s reporting period. Looking ahead, Target expects only about 1% sales growth for the year, falling short of Wall Street expectations.
Despite these concerns, Target’s stock rose 5% in premarket trading as investors had braced for worse results. Target’s cautious outlook comes amid similar warnings from other major retailers, including Walmart and E.l.f. Beauty, which have also pointed to a slower-than-usual start to the year.
Beyond economic conditions, Target faces challenges from shifting consumer habits and increased competition. The retailer has struggled to maintain strong sales of discretionary items such as clothing, electronics, and home decor, which are typically more profitable than essential goods. To attract shoppers, Target has introduced new merchandise, including exclusive collaborations with Champion and Warby Parker.
Another key issue for Target is tariff uncertainty. The company acknowledged that potential new tariffs on imported goods could impact its profit margins, as a large portion of its sales come from general merchandise that is often sourced from overseas. Target also faces pressure from changing political and economic factors, with some consumers calling for boycotts in response to its recent policy changes on diversity, equity, and inclusion initiatives.
CNN, the Financial Times, and CNBC contributed to this report.
