Target (TGT) Earnings Preview – Turnaround When?!

Retailer Target (TGT) reports earnings tomorrow morning ahead of the opening bell, and the bar is low again. 

The report comes as the retailer grapples with a challenging consumer environment, and investors will be closely watching for signs of stabilization in traffic and margins. The Zacks Consensus Estimate for fiscal third-quarter revenues is pegged at $25.36 billion, indicating a 1.2% decline from the year-ago reported level. Also, the consensus mark for quarterly earnings is $1.76 per share, indicating a 4.9% decline from the year-ago quarter’s reported figure. The muted outlook reflects continued softness in discretionary categories like apparel and home goods. Essentials, groceries, and digital sales may provide some offset. 

Last quarter, Target reported $25.2 billion in revenue and EPS of $2.05, missing consensus estimates and highlighting ongoing cost pressures. Comparable sales last quarter decreased 1.9% year-over-year in Q2 while Digital comparable sales grew 4.3%. Soft store traffic has been a recurring issue. Investors are eager to learn if this trend has stabilized or improved. Analysts expect a comparable sales decline of around 1.4% for the quarter. 

Ongoing challenges from promotional activities, digital fulfillment costs, and an unfavorable product mix are expected to weigh on operating margins. Analysts expect the number of transactions to decline 1% and the average transaction amount to dip 0.4% for the fiscal third quarter. Ongoing tariff exposure and any markdowns might have further pressured performance, creating a drag that offset some of the benefits from strategic and operational improvements. The last University of Michigan Consumer sentiment data hit its second lowest level ever recorded, which reflects the concern investors have for the health of the shopper. 

Target's integrated omnichannel strategy, including popular same-day fulfillment options like Drive Up and Order Pickup, is a key strength that may have helped mitigate some of the soft store traffic. Commentary on the progress of the CEO transition plan, with Michael Fiddelke set to take over on February 1, 2026, will also be a point of interest for investors.

Target stock has been under pressure, losing 34% of its value year-to-date. The stock is near six-year lows as investors remain cautious of any potential turnaround from recent performance. The Option Market is pricing in about a +/- 8% move ($7.10) post earnings. The stock is currently trading at an attractive valuation compared to its peers like Walmart (WMT), with a forward 12-month price-to-earnings (P/E) ratio near 11.50, well below the industry average. 

Some analysts believe the stock is undervalued, with strong free cash flow supporting a high dividend yield of 5.15%. With the bar low into Target’s earnings, any upside surprise on traffic, margins or guidance can only help but the turnaround story remains elusive at this point. 

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