Bank of America downgraded the retail giant, Target Corporation, after the company’s Q1 results missed Wall Street’s expectations.
Weakening revenues
In its Q1 print, the company’s sales fell by 2.8%, missing estimates.
The merchandise sales fell by 3%. The company’s stores and website saw transactions dip by 2.4%.
The average transaction amount also fell by 1.4%, showing weak customer spending.
Target’s CEO, CEO Brian Cornell, in the company’s earnings call, blamed the weakness on declining customer confidence in five consecutive months, uncertainty caused by tariffs, and backlash to the company’s rollback of diversity, equity, and inclusion policies.
Cornell also added that the company is losing market share in merchandise categories it is tracking internally.
The company only managed to gain or hold on to market share in 15 out of 35 categories.
The CEO said the company is not happy with the performance and is looking to gain market share in 60 to 80 percent of those categories.
The company also flagged a low single-digit sales decline for the coming year in its outlook.
Target’s shares declined by over 5% on Wednesday.
Bank of America sees further weakness
Bank of America analyst Robert Ohmes downgraded the stock to neutral and lowered the target price to $105.
Though the target expects a 12% upside from current levels, the stock has already fallen 32% in 2025 so far.
Ohmes sees extended uncertainty for the company even as it is trading near 10-year lows.
The analyst pointed out that the continuing sales weakness, along with comparable sales recovery being pushed again, will have margin pressure for the stock.
On a positive note, Ohmes said that growth in high-margin businesses like marketplace and digital advertising could provide margin stability for the long term.
The company’s advertising revenue had grown by 25% in the quarter.
The analyst lowered the adjusted earnings per share forecast for 2026 due to weaker sales and margin outlook.
Analyst consensus has been turning negative for the company.
Out of 39 analysts, 24 have a hold rating for the stock and 13 have a buy rating.
Tariffs hurt retail companies
Target isn’t the only retailer that has been hurt by the tariffs and negative customer sentiment.
Walmart, another retailer, has warned of increased prices for essential goods due to tariffs.
The company warned the investors of big volatility in its margins and earnings for the next quarter.
Increasing inflationary concerns were weighing on customer confidence in the quarter.
Although Walmart had better Q1 numbers, where the sales grew by 4.5%.
US President Donald Trump had criticised Walmart for its comments.
In a social media post, he asked Walmart to “eat the tariffs” and not pass the higher cost to its customers.
Target had also earlier warned customers of increased prices due to tariffs.
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