
Target (TGT) may have to do a lot more this year than open Warby Parker (WRBY) eyeglass shops as it becomes the latest retailer to warn about the impact of Trump tariffs.
The discount retailer delivered sales, gross profit margin, and earnings beats for the fourth quarter on Tuesday. Target credited sequential improvements in sales of apparel and home goods for the better-than-expected quarter.
But the cheery news stopped with the holiday numbers — though the print showed margins and sales fell year on year.
For one, Target once again underperformed rival Walmart’s (WMT) sales growth in stores and online as it ramped up price rollbacks and offered expanded grocery assortments.
Listen: Will Trump tariffs hammer retail stocks?
Further, Target issued what amounts to a first quarter profit warning amid fresh Trump tariffs on goods from China. Shares dropped 6% in afternoon trading.
“In light of ongoing consumer uncertainty and a small decline in February net sales, combined with tariff uncertainty and the expected timing of certain costs within the fiscal year, the company expects to see meaningful year-over-year profit pressure in its first quarter relative to the remainder of the year,” Target said in a statement.
Walmart issued soft full-year guidance several weeks ago, pinning the blame on tariff uncertainty.
Read more: What are tariffs, and how do they affect you?
Target declined to share specific first quarter earnings guidance. Yahoo Finance data shows Wall Street analysts were looking for a slight first quarter year-on-year earnings improvement.
The company is holding an investor day in New York City and will have a tall order in reawakening the near-term bull thesis on the stock following the guidance.
It told analysts on its earnings call it will move away from providing quarterly guidance, which likely won’t help bring back the bull case on the stock.
Target’s stock is down 15% year to date and off by 27% in the past year. In the past five years, Target’s stock has fallen 34% compared to a 12% advance for the S&P 500 (^GSPC).
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Fourth quarter net sales: -3.1% year over year to $30.9 billion, vs. estimates for $30.67 billion
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Gross profit margin: 26.2% vs. 26.6% a year ago, vs. estimates for 25.5%
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Diluted earnings per share: Down 19% year over year to $2.41, vs. estimates for $2.26 (guidance: $1.85 to $2.45)
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Comparable sales: Up 1.5% year over year, vs. 1.18% estimate (Last year comparable sales fell 4.4%; Walmart US reported a 4.6% gain in its fourth quarter.)