Target Corporation Reports First Quarter Earnings
- First quarter Net Sales were $23.8 billion, compared with $24.5 billion in 2024.
- Digital comparable sales grew 4.7 percent reflecting more than 35 percent growth in same-day delivery powered by Target Circle 360TM and continued growth in Drive Up.
- Key seasonal moments such as Valentine’s Day and Easter outperformed non-holiday periods throughout the quarter.
- The Company’s limited-time partnership with kate spade was the strongest designer collaboration in the last decade.
- First quarter SG&A Expense and Operating Income included $593 million in pre-tax gains from the settlement of credit card interchange fee litigation.
- First quarter GAAP EPS was $2.27 compared with $2.03 last year. Adjusted EPS1, which excludes the gains from litigation settlements, was $1.30.
- The Company has established an acceleration office led by Michael Fiddelke, with the purpose of enabling faster decisions and execution of its core strategic initiatives in support of a return to growth.
Minneapolis, MN — Target Corp. announced its first quarter 2025 financial results.
The Company reported first quarter GAAP earnings per share (EPS) of $2.27 and Adjusted earnings per share1 of $1.30 compared with GAAP and Adjusted EPS of $2.03 in 2024. The attached tables provide a reconciliation of non-GAAP to GAAP measures. All earnings per share figures refer to diluted EPS.
“In the first quarter, our team navigated a highly challenging environment and focused on delivering the outstanding assortment, experience and value guests expect from Target,” said Brian Cornell, chair and chief executive officer of Target Corporation. “While our sales fell short of our expectations, we saw several bright spots in the quarter, including healthy digital growth, led by a 36 percent increase in same-day delivery through Target Circle 360, and our strongest designer collaboration in more than a decade, kate spade for Target. While these highlights reinforce our confidence in the underlying health of our business, we’re not satisfied with current performance and know we have opportunities to deliver faster progress on our roadmap for growth. This morning, we announced the establishment of a multi-year acceleration office, led by Michael Fiddelke, along with several leadership changes. These steps forward are intended to build more speed and agility into how we operate, and position key capabilities to drive long-term profitable growth. With these changes and the financial strength to continue investing in our business, I’m confident we can emerge an even stronger company over time.”
Guidance
For fiscal 2025, the Company now expects a low-single digit decline in sales, and GAAP EPS of $8.00 to $10.00. Adjusted EPS, which excludes the gains from the litigation settlements in the first quarter, is expected to be approximately $7.00 to $9.00.
Operating Results
Comparable sales decreased 3.8 percent in the first quarter, reflecting a comparable store sales decline of 5.7 percent and comparable digital sales growth of 4.7 percent. Net Sales of $23.8 billion in the first quarter were 2.8 percent lower than last year, reflecting a merchandise sales decrease of 3.1 percent and a 13.5 percent increase in other revenue. First quarter operating income of $1.5 billion was 13.6 percent higher than last year.
First quarter operating income margin rate, which includes the one-time benefit of the settlement of credit card interchange fee litigation, was 6.2 percent in 2025, compared with 5.3 percent in 2024. Excluding the litigation settlement gains, operating income margin rate was 3.7 percent in 2025. First quarter gross margin rate was 28.2 percent, compared with 28.8 percent in 2024, reflecting the net impact of merchandising activities, including higher markdown rates, as well as digital fulfillment and supply chain costs due to increased digital sales penetration and new supply chain facilities coming online.
These pressures were partially offset by the benefit of lower inventory shrink. First quarter SG&A expense rate was 19.3 percent in 2025, compared with 21.0 percent in 2024, reflecting credit card interchange fee settlements and disciplined cost management partially offset by the deleveraging impact of lower sales and higher costs, including team member pay and benefits. Without the litigation settlement gains, the SG&A expense rate was 21.7 percent in Q1 2025.
Interest Expense and Taxes
The Company’s first quarter 2025 net interest expense was $116 million, compared with $106 million last year, reflecting lower interest income in the current year.
First quarter 2025 effective income tax rate was 25.0 percent, compared with the prior year rate of 22.7 percent, reflecting the impact of discrete tax expenses in the current year.
Capital Deployment and Return on Invested Capital
The Company paid dividends of $510 million in the first quarter, compared with $508 million last year, reflecting a 1.8 percent increase in the dividend per share.
The Company repurchased $251 million of its shares in the first quarter, retiring 2.2 million shares of common stock at an average price of $114.60. As of the end of the quarter, the Company had approximately $8.4 billion of remaining capacity under the repurchase program approved by Target’s Board of Directors in August 2021.
For the trailing twelve months through first quarter 2025, after-tax return on invested capital (ROIC) was 15.1 percent, compared with 15.4 percent for the trailing twelve months through first quarter 2024. The tables in this release provide additional information about the Company’s ROIC calculation.
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TARGET CORPORATION
Consolidated Statements of Operations |
||||||
|
Three Months Ended |
||||||
|
(millions, except per share data) (unaudited) |
May 3, 2025 |
May 4, 2024 |
Change |
|||
|
Net sales |
$ 23,846 |
$ 24,531 |
(2.8) |
|||
|
Cost of sales |
17,128 |
17,471 |
(2.0) |
|||
|
Selling, general and administrative expenses |
4,591 |
5,146 |
(10.8) |
|||
|
Depreciation and amortization (exclusive of depreciation included in cost of sales) |
655 |
618 |
6.0 |
|||
|
Operating income |
1,472 |
1,296 |
13.6 |
|||
|
Net interest expense |
116 |
106 |
8.7 |
|||
|
Net other income |
(26) |
(29) |
(12.8) |
|||
|
Earnings before income taxes |
1,382 |
1,219 |
13.4 |
|||
|
Provision for income taxes |
346 |
277 |
25.1 |
|||
|
Net earnings |
$ 1,036 |
$ 942 |
10.0 % |
|||
|
Basic earnings per share |
$ 2.28 |
$ 2.04 |
11.7 % |
|||
|
Diluted earnings per share |
$ 2.27 |
$ 2.03 |
11.7 % |
|||
|
Weighted average common shares outstanding |
||||||
|
Basic |
455.0 |
462.2 |
(1.6) % |
|||
|
Diluted |
456.5 |
463.9 |
(1.6) % |
|||
|
Antidilutive shares |
2.4 |
1.6 |
||||
|
Dividends declared per share |
$ 1.12 |
$ 1.10 |
1.8 % |
|||
|
TARGET CORPORATION
Consolidated Statements of Financial Position |
||||||
|
(millions, except footnotes) (unaudited) |
May 3, 2025 |
February 1, 2025 |
May 4, 2024 |
|||
|
Assets |
||||||
|
Cash and cash equivalents |
$ 2,887 |
$ 4,762 |
$ 3,604 |
|||
|
Inventory |
13,048 |
12,740 |
11,730 |
|||
|
Other current assets |
1,824 |
1,952 |
1,744 |
|||
|
Total current assets |
17,759 |
19,454 |
17,078 |
|||
|
Property and equipment, net |
33,182 |
33,022 |
33,114 |
|||
|
Operating lease assets |
3,739 |
3,763 |
3,486 |
|||
|
Other noncurrent assets |
1,505 |
1,530 |
1,439 |
|||
|
Total assets |
$ 56,185 |
$ 57,769 |
$ 55,117 |
|||
|
Liabilities and shareholders’ investment |
||||||
|
Accounts payable |
$ 11,823 |
$ 13,053 |
$ 11,561 |
|||
|
Accrued and other current liabilities |
6,029 |
6,110 |
5,684 |
|||
|
Current portion of long-term debt and other borrowings |
1,139 |
1,636 |
2,614 |
|||
|
Total current liabilities |
18,991 |
20,799 |
19,859 |
|||
|
Long-term debt and other borrowings |
14,334 |
14,304 |
13,487 |
|||
|
Noncurrent operating lease liabilities |
3,564 |
3,582 |
3,392 |
|||
|
Deferred income taxes |
2,338 |
2,303 |
2,543 |
|||
|
Other noncurrent liabilities |
2,011 |
2,115 |
1,996 |
|||
|
Total noncurrent liabilities |
22,247 |
22,304 |
21,418 |
|||
|
Shareholders’ investment |
||||||
|
Common stock |
38 |
38 |
39 |
|||
|
Additional paid-in capital |
7,011 |
6,996 |
6,747 |
|||
|
Retained earnings |
8,360 |
8,090 |
7,519 |
|||
|
Accumulated other comprehensive loss |
(462) |
(458) |
(465) |
|||
|
Total shareholders’ investment |
14,947 |
14,666 |
13,840 |
|||
|
Total liabilities and shareholders’ investment |
$ 56,185 |
$ 57,769 |
$ 55,117 |
|||
|
Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 454,364,799, 455,566,995, and 462,635,539 shares issued and outstanding as of May 3, 2025, February 1, 2025, and May 4, 2024, respectively. |
|
Preferred Stock Authorized 5,000,000 shares, $0.01 par value; no shares were issued or outstanding during any period presented. |
|
TARGET CORPORATION
Consolidated Statements of Cash Flows |
||||
|
Three Months Ended |
||||
|
(millions) (unaudited) |
May 3, 2025 |
May 4, 2024 |
||
|
Operating activities |
||||
|
Net earnings |
$ 1,036 |
$ 942 |
||
|
Adjustments to reconcile net earnings to cash provided by operating activities: |
||||
|
Depreciation and amortization |
787 |
718 |
||
|
Share-based compensation expense |
69 |
72 |
||
|
Deferred income taxes |
36 |
64 |
||
|
Noncash (gains) / losses and other, net |
(4) |
(31) |
||
|
Changes in operating accounts: |
||||
|
Inventory |
(308) |
156 |
||
|
Other assets |
146 |
43 |
||
|
Accounts payable |
(1,344) |
(524) |
||
|
Accrued and other liabilities |
(143) |
(339) |
||
|
Cash provided by operating activities |
275 |
1,101 |
||
|
Investing activities |
||||
|
Expenditures for property and equipment |
(790) |
(674) |
||
|
Other |
3 |
3 |
||
|
Cash required for investing activities |
(787) |
(671) |
||
|
Financing activities |
||||
|
Additions to long-term debt |
991 |
— |
||
|
Reductions of long-term debt |
(1,534) |
(32) |
||
|
Dividends paid |
(510) |
(508) |
||
|
Repurchase of stock |
(250) |
— |
||
|
Shares withheld for taxes on share-based compensation |
(60) |
(91) |
||
|
Cash required for financing activities |
(1,363) |
(631) |
||
|
Net decrease in cash and cash equivalents |
(1,875) |
(201) |
||
|
Cash and cash equivalents at beginning of period |
4,762 |
3,805 |
||
|
Cash and cash equivalents at end of period |
$ 2,887 |
$ 3,604 |
||
|
TARGET CORPORATION
Operating Results |
|||
|
Net Sales |
Three Months Ended |
||
|
(millions) (unaudited) |
May 3, 2025 |
May 4, 2024 |
|
|
Apparel and accessories |
$ 3,711 |
$ 3,897 |
|
|
Beauty |
3,101 |
3,119 |
|
|
Food and beverage |
5,902 |
5,853 |
|
|
Hardlines |
3,074 |
3,160 |
|
|
Home furnishings and décor |
3,220 |
3,519 |
|
|
Household essentials |
4,357 |
4,549 |
|
|
Other merchandise sales |
40 |
46 |
|
|
Merchandise sales |
23,405 |
24,143 |
|
|
Advertising revenue (a) |
163 |
130 |
|
|
Credit card profit sharing |
141 |
142 |
|
|
Other |
137 |
116 |
|
|
Net sales |
$ 23,846 |
$ 24,531 |
|
|
(a) |
Primarily represents revenue related to advertising services provided via the Company’s Roundel digital advertising business offering. Roundel services are classified as either Net Sales or as a reduction of Cost of Sales or Selling, General, and Administrative (SG&A) Expenses, depending on the nature of the advertising arrangement. |
|
Rate Analysis |
Three Months Ended |
|||
|
(unaudited) |
May 3, 2025 |
May 4, 2024 |
||
|
Gross margin rate (a) |
28.2 % |
28.8 % |
||
|
SG&A expense rate (a)(b) |
19.3 |
21.0 |
||
|
Depreciation and amortization expense rate (exclusive of depreciation included in cost of sales) |
2.7 |
2.5 |
||
|
Operating income margin rate (b) |
6.2 |
5.3 |
||
|
Note: Gross margin is calculated as Net Sales less Cost of Sales. All rates are calculated by dividing the applicable amount by Net Sales. |
|
|
(a) |
Reflects the impact of a reclassification of prior year amounts, which were not material, to conform with current year presentation. The reclassifications increased Cost of Sales with equal and offsetting decreases to SG&A Expenses. |
|
(b) |
SG&A Expenses and Operating Income for the three months ended May 3, 2025, includes gains, net of legal fees, related to settlements of credit card interchange fee litigation matters in which we were a plaintiff. |
Sales Metrics
Comparable sales include all Merchandise Sales, except sales from stores open less than 13 months or that have been closed. Digitally originated sales include all Merchandise Sales initiated through mobile applications and the Company’s websites.
|
Comparable Sales |
Three Months Ended |
|||
|
(unaudited) |
May 3, 2025 |
May 4, 2024 |
||
|
Comparable sales change |
(3.8) % |
(3.7) % |
||
|
Drivers of change in comparable sales |
||||
|
Number of transactions (traffic) |
(2.4) |
(1.9) |
||
|
Average transaction amount |
(1.4) |
(1.9) |
||
|
Comparable Sales by Channel |
Three Months Ended |
|||
|
(unaudited) |
May 3, 2025 |
May 4, 2024 |
||
|
Stores originated comparable sales change |
(5.7) % |
(4.8) % |
||
|
Digitally originated comparable sales change |
4.7 |
1.4 |
||
|
Sales by Channel |
Three Months Ended |
|||
|
(unaudited) |
May 3, 2025 |
May 4, 2024 |
||
|
Stores originated |
80.2 % |
81.7 % |
||
|
Digitally originated |
19.8 |
18.3 |
||
|
Total |
100 % |
100 % |
||
|
Sales by Fulfillment Channel |
Three Months Ended |
|||
|
(unaudited) |
May 3, 2025 |
May 4, 2024 |
||
|
Stores |
97.6 % |
97.7 % |
||
|
Other |
2.4 |
2.3 |
||
|
Total |
100 % |
100 % |
||
|
Note: Sales fulfilled by stores include in-store purchases and digitally originated sales fulfilled by shipping merchandise from stores to guests, Order Pickup, Drive Up, and Same Day Delivery. |
|
Target Circle Card Penetration |
Three Months Ended |
|||
|
(unaudited) |
May 3, 2025 |
May 4, 2024 |
||
|
Total Target Circle Card Penetration |
17.4 % |
18.0 % |
||
|
Number of Stores and Retail Square Feet |
Number of Stores |
Retail Square Feet (a) |
||||||||||
|
(unaudited) |
May 3, |
February 1, |
May 4, |
May 3, |
February 1, |
May 4, |
||||||
|
170,000 or more sq. ft. |
273 |
273 |
273 |
48,824 |
48,824 |
48,824 |
||||||
|
50,000 to 169,999 sq. ft. |
1,562 |
1,559 |
1,547 |
195,436 |
195,050 |
193,529 |
||||||
|
49,999 or less sq. ft. |
146 |
146 |
143 |
4,404 |
4,404 |
4,301 |
||||||
|
Total |
1,981 |
1,978 |
1,963 |
248,664 |
248,278 |
246,654 |
||||||
|
(a) |
In thousands; reflects total square feet less office, supply chain facility, and vacant space. |
TARGET CORPORATION
Reconciliation of Non-GAAP Financial Measures
To provide additional transparency, we disclose non-GAAP adjusted diluted earnings per share (Adjusted EPS). This metric excludes certain items presented below. We believe this information is useful in providing period-to-period comparisons of the results of our operations. This measure is not in accordance with, or an alternative to, generally accepted accounting principles in the U.S. (GAAP). The most comparable GAAP measure is diluted earnings per share. Adjusted EPS should not be considered in isolation or as a substitution for analysis of our results as reported in accordance with GAAP. Other companies may calculate Adjusted EPS differently, limiting the usefulness of the measure for comparisons with other companies.
|
Reconciliation of Non-GAAP Adjusted EPS |
Three Months Ended |
|||||||||||||
|
May 3, 2025 |
May 4, 2024 |
|||||||||||||
|
(millions, except per share data) (unaudited) |
Pretax |
Net of Tax |
Per Share |
Pretax |
Net of Tax |
Per Share |
Change |
|||||||
|
GAAP diluted EPS |
$ 2.27 |
$ 2.03 |
11.7 % |
|||||||||||
|
Adjustments |
||||||||||||||
|
Interchange fee settlements (a) |
$ (593) |
$ (441) |
$ (0.97) |
$ — |
$ — |
$ — |
||||||||
|
Adjusted EPS |
$ 1.30 |
$ 2.03 |
(35.9) % |
|||||||||||
|
(a) |
Note (b) to the Rate Analysis table provides additional information. |
|
Reconciliation of Non-GAAP Adjusted EPS Guidance |
||
|
(per share) (unaudited) |
Full Year 2025 |
|
|
GAAP diluted earnings per share guidance |
~$8.00 – $10.00 |
|
|
Estimated adjustments |
||
|
Interchange fee settlements |
($0.97) |
|
|
Other (a) |
— |
|
|
Adjusted diluted earnings per share guidance |
$7.00 – $9.00 |
|
|
(a) |
Full-year 2025 GAAP EPS may include the impact of additional discrete items, which will be excluded in calculating Adjusted EPS. The guidance does not currently reflect any such additional discrete items. In the past, these items have included losses on the early retirement of debt and certain other items that are discretely managed. |
Earnings before interest expense and income taxes (EBIT) and earnings before interest expense, income taxes, depreciation and amortization (EBITDA) are non-GAAP financial measures. We believe these measures provide meaningful information about our operational efficiency compared with our competitors by excluding the impact of differences in tax jurisdictions and structures, debt levels, and, for EBITDA, capital investment. These measures are not in accordance with, or an alternative to, GAAP. The most comparable GAAP measure is net earnings. EBIT and EBITDA should not be considered in isolation or as a substitution for analysis of our results as reported in accordance with GAAP. Other companies may calculate EBIT and EBITDA differently, limiting the usefulness of the measures for comparisons with other companies.
|
EBIT and EBITDA |
Three Months Ended |
|||||
|
(dollars in millions) (unaudited) |
May 3, 2025 |
May 4, 2024 |
Change |
|||
|
Net earnings |
$ 1,036 |
$ 942 |
10.0 % |
|||
|
+ Provision for income taxes |
346 |
277 |
25.1 |
|||
|
+ Net interest expense |
116 |
106 |
8.7 |
|||
|
EBIT |
$ 1,498 |
$ 1,325 |
13.0 % |
|||
|
+ Total depreciation and amortization (a) |
787 |
718 |
9.7 |
|||
|
EBITDA |
$ 2,285 |
$ 2,043 |
11.9 % |
|||
|
(a) |
Represents total depreciation and amortization, including amounts classified within Depreciation and Amortization and within Cost of Sales. |
We have also disclosed after-tax ROIC, which is a ratio based on GAAP information, with the exception of the add-back of operating lease interest to operating income. We believe this metric is useful in assessing the effectiveness of our capital allocation over time. Other companies may calculate ROIC differently, limiting the usefulness of the measure for comparisons with other companies.
|
After-Tax Return on Invested Capital |
||||||
|
(dollars in millions) (unaudited) |
||||||
|
Trailing Twelve Months |
||||||
|
Numerator |
May 3, 2025 |
May 4, 2024 (a) |
||||
|
Operating income |
$ 5,742 |
$ 5,675 |
||||
|
+ Net other income |
102 |
99 |
||||
|
EBIT |
5,844 |
5,774 |
||||
|
+ Operating lease interest (b) |
165 |
133 |
||||
|
– Income taxes (c) |
1,373 |
1,314 |
||||
|
Net operating profit after taxes |
$ 4,636 |
$ 4,593 |
||||
|
Denominator |
May 3, 2025 |
May 4, 2024 |
April 29, 2023 |
|||
|
Current portion of long-term debt and other borrowings |
$ 1,139 |
$ 2,614 |
$ 200 |
|||
|
+ Noncurrent portion of long-term debt |
14,334 |
13,487 |
16,010 |
|||
|
+ Shareholders’ investment |
14,947 |
13,840 |
11,605 |
|||
|
+ Operating lease liabilities (d) |
3,922 |
3,723 |
2,921 |
|||
|
– Cash and cash equivalents |
2,887 |
3,604 |
1,321 |
|||
|
Invested capital |
$ 31,455 |
$ 30,060 |
$ 29,415 |
|||
|
Average invested capital (e) |
$ 30,757 |
$ 29,737 |
||||
|
After-tax return on invested capital (f) |
15.1 % |
15.4 % |
||||
|
(a) |
The trailing twelve months ended May 4, 2024, consisted of 53 weeks compared with 52 weeks in the current-year period. |
|
(b) |
Represents the add-back to operating income driven by the hypothetical interest expense we would incur if the property under our operating leases was owned or accounted for under finance leases. Calculated using the discount rate for each lease and recorded as a component of rent expense within Operating Income. Operating lease interest is added back to Operating Income in the ROIC calculation to control for differences in capital structure between us and our competitors. |
|
(c) |
Calculated using the effective tax rates, which were 22.8 percent and 22.2 percent for the trailing twelve months ended May 3, 2025, and May 4, 2024, respectively. For the twelve months ended May 3, 2025, and May 4, 2024, includes tax effect of $1.3 billion related to EBIT, and $38 million and $30 million, respectively, related to operating lease interest. |
|
(d) |
Total short-term and long-term operating lease liabilities included within Accrued and Other Current Liabilities and Noncurrent Operating Lease Liabilities, respectively. |
|
(e) |
Average based on the invested capital at the end of the current period and the invested capital at the end of the comparable prior period. |
|
(f) |
For the trailing twelve months ended May 3, 2025, includes the impact of after-tax net gains on interchange fee settlements, which increased after-tax ROIC by 1.4 percentage points. Note (b) to the Rate Analysis table provides additional information. |
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