US retailer Target reported weaker profitability for its 2025 financial year, alongside a modest decline in fourth-quarter (Q4) sales, even as several product categories and non-merchandise revenue lines grew.
In the quarter ended 31 January 2026, net sales declined 1.5% to $30.45bn from $30.91bn in the prior-year period.
Comparable sales declined 2.5%, reflecting a 3.9% drop in comparable store sales, partly offset by a 1.9% rise in comparable digital sales.
Net earnings declined 5.2% to $1.04bn from $1.10bn in the same period last year.
Basic earnings per share fell 4.4% to $2.31 while diluted earnings per share (EPS) declined 4.5% to $2.30.
Operating income reached $1.38bn, down 5.9% from $1.46bn a year earlier.
The operating income margin rate was 4.5%, compared with 4.7% in 2024.
Quarterly gross margin improved to 26.6%, up from 26.2% in the prior year, supported by reduced inventory shrink and decreased supply chain and digital fulfilment costs, along with higher advertising and other revenue.
These gains were partly offset by increased product and import costs.
Sales growth in the quarter was led by food and beverage, beauty and toys, while performance in essentials and home improved compared with the third quarter.
Non-merchandise revenue rose by more than 25%, driven by membership income that more than doubled year-on-year, double-digit expansion in the Roundel advertising business, and marketplace growth exceeding 30%.
Same-day delivery through Target Circle 360 increased by more than 30%.
For the full year, net sales declined 1.7% to $104.78bn from $106.56bn in 2024, reflecting a 2.6% drop in comparable sales, partly offset by sales from new stores and higher non-merchandise revenue.
Net earnings fell 9.4% to $3.70bn from $4.09bn while operating income declined 8.1% to $5.1bn.
Target Corporation CEO Michael Fiddelke said: “Our team is firmly focused on writing Target's next chapter of growth, rooted in strengthening our merchandising authority, delivering an elevated and differentiated shopping experience, advancing our use of technology, and continuing to serve and invest in our team and communities.”
Looking ahead, the company expects net sales growth of around 2% in 2026 and anticipates its full-year operating income margin rate to be 20 basis points higher than the 4.6% adjusted operating margin recorded in 2025.
