Target slashed its full-year financial forecast. The retailer reduced their projection from a few months ago of a small gain for the year, now projecting a “low-single-digit decline,” citing a "challenging" economy and backlash over DEI pullback. The retailer reported a 3.8% decline in comparable sales for Q1 2025 driven by a decrease in traffic down 3.4% and lower average basket size down 1.4%.
"We faced several additional headwinds this quarter, including five consecutive months of declining consumer confidence, uncertainty regarding the impact of potential tariffs," Brian Cornell, CEO of Target, said in the earnings call. "While we believe each of these factors played a role in our first quarter performance, we can't reliably estimate the impact of each one separately."
Despite overall challenges, beauty remains a bright spot for the retailer, remaining its fastest-growing category. Last year, beauty was the only major category to deliver positive comparable sales growth of up to 6%. The momentum continued amidst the headwinds for Q1 2025, standing out with nearly 7% growth for the quarter.
According to Circana Q1 2025 research, beauty in the mass channel outpaced prestige for the first time in several years, posting a year-over-year dollar increase of 3%.
Target continued its ongoing evolution of the beauty category, announcing in February the launch of 45 new beauty brands and 2,000 new items, with 90 percent priced under $20, with more newness to come in 2025.
Target’s strategic focus on beauty, which includes exclusive brand partnerships, expanding its assortment, and enhancing in-store experiences, appears to resonate with shoppers. Beauty will be included among snacks and beverages in the over 10,000 item assortment in the Bullseye’s Playground for summer.
Cornell said, “Target's strategy, scale and long-term perspective enable us to stay resilient in difficult times and keep investing in the future. We are not satisfied with recent performance, and we're focused on accelerating our strategy to drive long-term profitable growth and deliver the assortment, experience and value consumers expect from Target.”
