Target Trails Walmart As Digital Woes, Tariffs Take A Toll

Target Corporation TGT is slipping behind Walmart Inc WMT in sales growth as slowing digital performance, higher import exposure, and mounting tariff pressures weigh on its outlook.

Bank Of America Securities analyst Robert F. Ohmes downgraded the stock from Neutral to Underperform, lowering the price forecast from $105 to $93.

Ohmes cited a lower fiscal 2027 adjusted EPS outlook of $7.75 and growing long-term sales and margin risks from slowing digital growth, limited scale in digital ads and third-party marketplace, tariff and pricing pressures, and rising competition from Walmart and Amazon.com, Inc. AMZN.

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Ohmes said Target is lagging Walmart in comp sales CAGR since 2019.

In July, Target's mobile app MAUs fell 4.1% year over year, while Walmart U.S. grew 17.2%, and its online sales grew 5%–6% versus Walmart's 20%–25%.

The analyst added that more substantial digital traffic is crucial for scaling advertising and third-party marketplace fees, which are necessary to offset margin pressures and fund investments in automation, technology, and AI.

Ohmes pointed out that with imports making up about 50% of Target’s COGS versus roughly 33% for Walmart, Target would need to raise average prices at nearly double Walmart’s rate to offset tariffs.

The analyst estimated that Target would need about an 8% price hike in 2027, versus 4%–5% for Walmart, without other mitigations.

Recent shifts in merchandising and partnerships, including those with Ulta Beauty, Inc. ULTA, may further increase risks in the challenging sourcing environment.

Price Action: TGT shares are trading lower by 1.3% to $103.00 at last check Friday.

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