Trump's tariffs could further eat into Target's profits
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Target said it's going to have to raise prices on fruit and other goods imported from Mexico. Photo: Mario Tama/Getty Images
Target's 2024 was gloomy. This year could be worse.
Why it matters: The Minneapolis-based retailer warned during its fourth-quarter earnings call that the Trump administration's new tariffs, as well as slipping consumer confidence, will cut into sales and profits.
By the numbers: Its share price fell by 3% Tuesday and is now down about 25% from a year ago.
The latest: Target's earnings call happened as Trump implemented 25% tariffs on goods from Mexico and Canada, plus an additional 10% levy on Chinese imports.
What they're saying: CEO Brian Cornell told CNBC that Target could be forced to raise prices on fruits and vegetables imported from Mexico as soon as this week.
- "Those are categories where we'll try to protect pricing, but the consumer will likely see price increases over the next couple of days," he said.
Zoom out: Richfield-based Best Buy, which also reported earnings Tuesday, issued its own warning about price hikes. China and Mexico are its top two sources of imports.
Reality check: Target's struggles go beyond tariffs. Same-store sales — an important metric for retailers — grew only 1.5% last year, while rivals Walmart and Costco had much better growth at 4.5% and 5.3%, respectively. It's predicting same-store sales to be flat in 2025.
- Target's decision to pull back on DEI initiatives in January has led to consumer backlash and even boycotts, though those effects won't show up until the next quarterly earnings report.
Between the lines: Target gets 60% of its revenue from discretionary spending on things like clothing, toys and home furnishings, Zacks Investment Research director of research Sheraz Mian told Axios.
- "Consumers have been spending less on discretionary goods and more on discretionary experiences," he said.
- Walmart, he said, gets 60% of its sales from groceries and other essentials.
What we're watching: Target laid out a strategic plan to grow sales more than $15 billion by 2030. (It did $106.6 billion in revenue in 2024.)
- It will open 20 new stores in 2025, mainly the large-format variety.
- Target wants to triple its memberships to loyalty program Target Circle 360 by adding new perks and benefits, including a future partnership with Marriott Bonvoy, and is also planning a "reinvention" of its gaming, sports and toys categories with in-store experiences, video game releases and expanded youth sports offerings.