The news: Target’s weak guidance eclipsed better-than-expected Q4 results, as it followed Walmart and Amazon in predicting a significant hit to profits amid tariff uncertainty.

By the numbers: While Target has notably struggled to keep pace with its mass market peers, its Q4 showed promise.

• Comparable sales rose 1.5% YoY in Q4, aided by a sequential acceleration in demand for discretionary categories such as apparel, toys, and beauty.
• Net sales fell roughly 3% YoY to $30.92 billion, ahead of LSEG’s $30.82 billion estimate.
• Earnings per share were $2.41, beating expectations for $2.26—although profitability was hurt by increased promotions and clearance markdowns, as well as higher ecommerce fulfillment and supply chain expenses.

The bad news: Unfortunately for Target, the green shoots in discretionary spending during the holiday quarter are likely to wither quickly as tariffs—and related price hikes—chill consumer spending. It forecast full-year sales growth of just 1% in 2025—considerably less than the 2.6% analysts expected.

• Target expects to raise prices on fruit and vegetables “over the next couple of days” due to the tariffs on Mexican imports, CEO Brian Cornell told CNBC.
• It’s too soon to know which other products and categories will be subject to price increases, CCO Rick Gomez said during the retailer’s investor day.
• But Target is unlikely to pass along the entire cost of tariffs to the consumer; instead, it plans to hold prices steady for core products like T-shirts, while charging more for dresses, where it has more leeway.
• Even so, that may not be enough to convince wary shoppers: The retailer reported softer discretionary sales in February—before tariffs took effect—due to declining consumer confidence.

A “Tarzhay” for today: Despite the challenging environment, Target isn’t standing still. The retailer unveiled a plan to boost sales by over $15 billion by 2030, which includes investing $4 billion to $5 billion in its stores, supply chain, and technology.

1. Target is counting on newness to drive discretionary spending. The retailer is betting on partnerships with Warby Parker, Champion, and Disney to lure shoppers. It will also add products to its home and toys, gaming, and sports assortments to capitalize on those categories’ growth potential, as well as expand its private-label food offerings.
2. It’s improving the ecommerce experience. Target plans to use AI to offer more relevant recommendations, improve search results, and capitalize on social media trends. The retailer also aims to increase marketplace sales to over $5 billion in 2030, up from around $1 billion last year.
3. Stores and supply chain are also due for an upgrade. The retailer will open around 20 new stores this year and remodel “many more,” while updating its supply chain to deliver orders faster and more efficiently.

Our take: Target has a challenging road ahead, not least because of the upheaval and extreme uncertainty of the Trump administration’s economic policy. The retailer is also contending with a backlash to its DEI stance, which has alienated consumers and may be contributing to softer sales.

Target is betting that fresher, trendier merchandise will convince shoppers to push past their ethical and financial concerns. But with political beliefs increasingly dictating where consumers spend their money, and tariffs dampening demand for discretionary goods, that bet looks more and more like a long shot.