Target Under Strain? Analyst Cautions On Inventory, Margins, Tariff Uncertainty

JPMorgan analyst Christopher Horvers reiterated the Neutral rating on Target Corporation TGT on Wednesday.

Today, Target registered first-quarter sales of $23.85 billion (down 2.8% year over year), which missed the Street view of $24.32 billion.

The retail giant lowered its FY2025 adjusted EPS guidance from $8.80–$9.80 to $7.00–$9.00.

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Following Target’s earnings release, analyst Horvers noted that first-quarter comps and EPS aligned with bearish expectations, while the full-year guidance cut met expectations at the lower end of the range.

The analyst pointed out that weak comp performance and a gross margin miss, along with an 11% year-over-year increase in inventory, played into the bear case.

However, the updated full-year outlook appeared more favorable at the higher end, with bears generally expecting EPS between $7 and $8. Meanwhile, CNBC highlighted in a report that Target cited discretionary spending pressure tied to tariff uncertainty and recent DEI-related announcements.

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Horvers emphasized that the elevated inventory levels in discretionary categories remain a key concern, especially considering how markdowns will impact both revenue and margins.

The degree of promotional activity required to clear inventory remains a critical variable, particularly as Target was seen as the most negatively positioned name in his coverage universe going into the print.

He also noted that the stock closed yesterday trading at 14x the low end of guidance, while bears argue for a 12x multiple.

Price Action: TGT shares are trading lower by 3.76% to $94.42 at last check Wednesday.

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