Target Falls As Wall Street Questions The Comeback

Target’s turnaround got a much-needed jolt in the first quarter, but Wall Street still saw a comeback with plenty left to prove. The company reported net sales of $25.4 billion, up 6.7% from a year earlier, while comparable sales rose 5.6% and adjusted earnings came in at $1.71 per share. Shares fell nearly 4% Wednesday after the release, and early Thursday trading did little to change the message. Investors saw real progress, but not enough yet to erase concerns about cautious consumers, higher costs, and a recovery that has not fully earned the benefit of the doubt.

The clearest sign of progress came from shoppers actually showing up again. Comparable traffic increased 4.4%, digital comparable sales rose 8.9%, and same-day delivery powered by Target Circle 360 grew more than 27%. Net sales also rose across all six core merchandise categories, a notable shift for a retailer that has spent the past few years trying to fix weak discretionary demand and regain its old mix of style, value, and convenience. Target did not just post a better sales print — it gave the recovery its first real proof point.

The margin improvement added substance to the rebound, even if it was not spotless. Gross margin improved to 29.0% from 28.2% a year earlier, helped by supply-chain productivity, growth in advertising and other non-merchandise revenue, and lower markdowns. Adjusted operating income rose 29.1% from last year’s adjusted figure, though reported operating income declined because the prior-year quarter included interchange fee settlement gains. That muddied the reported profit comparison, but not the larger point — Target is selling better while leaning less on discounts to get shoppers through checkout.

The raised outlook should have helped the comeback pitch, but the stock’s drop showed Wall Street was still focused on what could go wrong. Target now expects net sales to grow around 4% this year, two percentage points above its prior range, and expects earnings to land near the high end of its earlier $7.50 to $8.50 per-share guidance. Management also struck a cautious tone, saying the company still has more work ahead in an uncertain operating environment. The selloff showed that investors were not rejecting the progress so much as refusing to pay up for it yet. Target finally put better numbers behind its turnaround, but Wall Street still wants durability, not just a better quarter.

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