First Home Depot, Now Target Reports Soft Demand 

At the start of the week, Goldman’s top consumer specialist Scott Feiler pointed out this would be a “very important week” for earnings across the consumer sector. Home Depot set the tone on Tuesday by cutting its full-year outlook as big-ticket spending and home-renovation demand continue to fade. Now, the next major earnings report just hit the tape, and it’s delivering another clear signal of softening trends. 

Target slashed the top end of its 2025 profit outlook amid softening demand, heavy markdowns, and uneven traffic, which continue to plague its turnaround strategy. 

Adjusted EPS is now forecasted at $7 to $8 for the year, trimming the prior $7 to $9 range. The Bloomberg Consensus estimate stood at $7.29. 

Full-Year Outlook Adjusted

• EPS: $7–$8 (prior: $7–$9; BBG Consensus: $7.29)

Q3 Takeaway: Results reflected consumer softness, weaker comps, declining traffic, margin pressure, and elevated costs. While EPS printed slightly ahead of consensus, the key retail metric of comparable sales fell more sharply than expected.

Q3 Highlights

• Comparable sales: -2.7% (consensus: -2.06%; prior year: +0.3%)

• Digital comps: +2.4% (consensus: +3.43%; prior year: +10.8%)

• Net sales: $25.27B (vs. est. $25.33B)

• Gross margin: 28.2%

• EBIT: $974M, -19% y/y

• EBITDA: $1.75B, -10% y/y (est. $1.89B)

• Operating income: $948M, -19% y/y (est. $1.12B)

• Operating margin: 3.8% (prior: 4.6%; est. 4.34%)

Q3 Customer Metrics

• Transactions: -2.2% y/y (prior: +2.4%)

• Avg. ticket: -0.5% (est. -0.79%; prior: -2%)

• Digital share of sales: 19.3% (prior: 18.5%)

• Stores originated sales: 80.7% (prior: 81.5%)

Q3 Footprint & Costs Total stores

• 1,995 (+0.9%; est. 1,988)

• SG&A: $5.54B, +1.4% (est. $5.48B)

• Store comps: -3.8% (est. -3.33%; prior: -1.9%)

Q3 Bottom Line

• Total stores: 1,995 (+0.9%; est. 1,988)

• SG&A: $5.54B, +1.4% (est. $5.48B)

• Store comps: -3.8% (est. -3.33%; prior: -1.9%)

“We are relentless in our pursuit of returning to growth and not satisfied with our current results,” Chief Operating Officer Michael Fiddelke said on a call with analysts. Fiddelke is set to become CEO in February. 

In New York, the stock fell about 2% in premarket trading, deepening its mutli-year bear market. As of Tuesday’s close, shares were already down roughly 34.5% year-to-date.

Shares are trading at mid-2019 lows. 

Target’s uninspiring earnings report and the continuation of a low- to mid-income squeeze build on a similar story from Home Depot’s earnings report on Tuesday. 

Goldman’s Feiler laid out the key earnings across the consumer sector this week (read here). Once earnings are finished this week, investors should have better visibility into spending behavior, particularly the mounting pressure on low- and middle-income consumers (read here). That backdrop helps explain the Trump administration’s renewed “operation affordability” push ahead of the midterm election cycle.