VALUATION HIGHLIGHTS

1. Target U.S. constitutes 100% of the Trefis price estimate for Target's stock.

WHAT HAS CHANGED?

1. Target Q3 2025 Snapshot

Target’s Q3 2025 results showed stronger-than-expected profitability even as sales momentum remained soft. Comparable sales fell 1.3%, but digital comps improved sequentially, and traffic trends stabilized. Despite the top-line dip, gross margin expanded meaningfully, driven by lower freight expenses, improved inventory discipline, and a favorable mix shift. Operating income rose 9.5% as SG&A leverage improved. Management highlighted continued strength in beauty and food & beverage, while discretionary categories—particularly home and hardlines—remained pressured.

Note: Target's FY'24 ended on February 1, 2025.

2. Looking Ahead

For Q4, Target guided to roughly flat comps and maintained a focus on cost efficiency and inventory balance ahead of holiday demand, emphasizing tight execution and improved value perception to rebuild traffic.

For fiscal 2025, Target Corporation expects net sales to decline by a low single-digit percentage and projects GAAP diluted earnings per share of about $8.00 to $10.00, with adjusted EPS in the range of $7.00 to $9.00.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Target's value that present opportunities for upside or downside to the current Trefis price estimate for Target:

• Target's Average U.S. Revenue per Square Foot: Target's average U.S. revenue per square foot increased from $437 in 2021 to $431 in 2024, negatively impacted by product mix, merchandising strategies, and overall market dynamics. Going forward, we expect this figure to grow gradually, driven by the company's small store expansion, rewards program, and improving online sales. We currently forecast Target's revenue per square foot to reach $447 by the end of our forecast period. However, if the average revenue per square foot grows faster than expected due to strong online sales, reaching $470 by the end of our forecast period, there could be a 6% upside to Target's stock price.


• Total Number of Target U.S. Stores: The total number of Target stores has increased consistently, driven in large part by the small-format stores. We forecast that the retailer's store count will reach around 2,050 by the end of our forecast period. However, if Target manages to expand more rapidly without losing average sales per store, and its store count reaches 2,160, there can be an upside of about 5%. This could happen if it penetrates more urban markets with smaller format stores.

For additional details, select a driver above or select a division from the interactive Trefis split for Target at the top of the page.

BUSINESS SUMMARY

Target Corporation is among the ten largest retailers in the U.S. by sales. Target generated around $107 billion in revenues in 2024 through selling apparel, electronics, housewares, groceries, and other products. It had 1,978 U.S. stores under operation as of the end of 2024.

KEY TRENDS

Threat of self-cannibalization due to massive size

Like any retailer, Target's long-term sales and income growth depend largely on the company's ability to open new stores and expand into new markets. However, due to Target's size, it runs the risk of cannibalizing its sales in the US.

Greater focus on groceries to improve store traffic

Consumer spending on groceries can be classified as non-discretionary and is, therefore, less correlated to macroeconomic factors. Target has focused on growing its grocery business due to its non-discretionary nature, in addition to the fact that many customers still prefer to buy groceries in stores rather than online. However, the grocery segment is a relatively low-margin business.

Growth in e-commerce

Target's online sales do not contribute much to its overall revenues, but they have been growing at a robust pace. We expect this to continue, with the e-commerce business eventually becoming a substantial contributor to the company's overall revenues.