Is There a Future for Target?
Key Points
Shares of the struggling retailer are down 34% over the past five years.
Inflation, tariffs, and stiff competition are squeezing Target's sales and margins.
The retailer recently appointed a new CEO, but investors seem skeptical.
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In a seemingly unstoppable bull market, Target (NYSE: TGT) stock is in a prolonged slump. Its shares have declined 34% over the past five years, while the S&P 500 has soared 103%. Target hasn't participated in this year's market rally either, with shares of the retailer down 30% in 2025 as of this writing.
Target's business has been in a funk for several years, and you could argue that the retailer hasn't been the same since the pandemic. After hitting an all-time high in 2022, Target's annual revenue is on pace to decline for a third straight year. In addition to grappling with margin pressure from tariffs and inflation, the retailer has lost hundreds of millions of dollars to inventory "shrink" -- a catch-all for lost, damaged, or stolen merchandise.
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There have been self-inflicted wounds as well. Target's decision to roll back its DEI policies earlier this year has sparked consumer backlash and boycotts.
Image source: Target.
A new CEO pick... and a lackluster Q2
The retailer's second-quarter results were a microcosm of its recent struggles. Net revenue dipped 1% to $25.2 billion, while same-store sales were down 2% compared to the year-ago period. Diluted earnings per share (EPS) fell 20%. Meanwhile, Walmart reported a nearly 5% increase in Q2 revenue, posted impressive e-commerce growth, and raised its full-year guidance for revenue and EPS.
On the same day that Target reported its lackluster Q2 results, the retailer announced that COO Michael Fiddelke will succeed Brian Cornell as CEO in February. While a change in leadership is probably needed, some are skeptical of the pick because Fiddelke, a 20-year veteran of Target, is part of the same team that got Target in its current situation.
However, Target's recent decision to cut 1,800 corporate jobs -- which Fiddelke announced in a memo to employees -- could be a signal that Fiddelke won't be following the same playbook as Cornell.
The pullback in Target's stock price has pushed its forward dividend yield to nearly 5%. But that might be fool's gold until the retailer can prove that it has a viable turnaround plan.
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Josh Cable has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target and Walmart. The Motley Fool has a disclosure policy.
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