Target's Perfect Storm: How the Retail Giant Hit Rock Bottom in 2025

A Rough Year Turns Brutal Target has had a rough 2025—and that might be the understatement of the year. The retail giant reported dropping sales during its latest quarter and slashed its full-year profit guidance on Wednesday, November 19, 2025, sending shockwaves through Wall Street. Shares have tumbled roughly 35% this year, marking one of the worst performances among major retailers. "Target is really struggling and does not seem to be able to climb out of the hole it has dug itself into," Neil Saunders, an analyst at GlobalData Retail, said in a note Wednesday. The assessment is stark but difficult to dispute given the mounting evidence of Target's decline. The company's sales have stagnated for about four years, and last month Target announced it would cut 1,000 corporate employees—roughly 8% of its global workforce. The layoffs signal just how serious management considers the situation, but they're merely the latest chapter in a crisis that has been building for years. The Numbers Tell a Devastating Story The quarterly earnings report released Wednesday painted a grim picture of Target's current state. Fewer customers visited stores during Target's most recent quarter, and they spent less when they shopped. Transaction counts declined year-over-year, while sales dropped in discretionary departments including beauty and home furnishings—categories where Target once dominated. Profit Guidance Slashed Perhaps most alarming for investors, full-year earnings per share are now expected to land between $7 and $8, dramatically reduced from previous August guidance of $7 to $9 and original 2025 guidance of $8.80 to $9.80. The fiscal 2024 result was $8.86 per share, meaning Target is projecting potential declines in profitability despite efforts to turn things around. Chief commercial officer Rick Gomez explained that shoppers are being extremely selective, stretching budgets and prioritizing value over brand loyalty or convenience. Customers are spending where it matters most—particularly on food, essentials, and beauty products—while hunting for deals on discretionary items rather than paying full price. Stock Market Carnage Target's stock performance tells the story of investor confidence collapsing. The stock slipped 1% during pre-market trading Wednesday, adding to a year of brutal losses. Target's stock plummeted to a four-year low, wiping out close to $12.4 billion in market value—all amid increasing public frustration with the company's recent decisions. For context, Target's market capitalization peaked during the pandemic retail boom when homebound consumers spent heavily on home goods, furnishings, and clothing. The subsequent decline represents not just a return to pre-pandemic levels but a fundamental reassessment of Target's competitive position and future prospects. The Core Problem: Wrong Products, Wrong Prices At its heart, Target's crisis stems from a fundamental mismatch between what the company sells and what customers want at prices they're willing to pay. Target specializes in cheap chic clothing and home decorations, but fewer customers believe they can find the best prices and deals there. Target has proven over and over that it is poorly positioned to succeed in this uneven economy, selling the wrong mix of items for an increasingly frugal customer. The Walmart and Amazon Squeeze The company has suffered from stiff competition from Walmart and Amazon, cluttered stores, and mistakes on prices and merchandise. While Target positioned itself as the upscale alternative to Walmart—the place where you could buy stylish home goods and trendy clothing alongside groceries—that value proposition has eroded. Shoppers, strained by inflation, have shifted their spending to essentials and value items. In this environment, Walmart's relentless focus on everyday low prices gives it a decisive advantage. Customers have shifted spending away from Target toward Walmart, Amazon, TJ Maxx and other chains they perceive as offering better value. Amazon's dominance in online shopping has made matters worse. Target invested heavily in e-commerce and same-day delivery services, but competing with Amazon's logistics network and Prime membership benefits requires enormous capital expenditures for uncertain returns. The Discretionary Spending Problem Target's merchandise mix heavily emphasizes discretionary categories—clothing, home décor, electronics, toys—that are the first things cash-strapped consumers cut from their budgets. When households face inflation in rent, food, healthcare, and gas, they naturally reduce spending on non-essentials. This stands in stark contrast to Walmart, which generates far more revenue from groceries and household essentials that people must buy regardless of economic conditions. Target's attempt to compete in groceries has met with limited success, as the company lacks Walmart's scale advantages and negotiating power with suppliers. The DEI Controversy That Compounded the Crisis If merchandising and pricing challenges weren't enough, Target ignited a firestorm in January 2025 by rolling back its diversity, equity, and inclusion programs—a decision that has haunted the company ever since. The Rollback On January 24, 2025, days into the Trump presidency, Target announced it was eliminating hiring goals for minority employees, ending an executive committee focused on racial justice and making other changes to its diversity initiatives. Yet in January 2025, the company abruptly moved to end many of those DEI goals, citing a "realignment" of strategy and a focus on "business neutrality". The timing was particularly striking. Target made this announcement just as the new administration was ramping up pressure on corporate DEI programs, leading many to view the move as capitulation to political pressure rather than a thoughtful strategic decision. What Target Was Walking Away From The magnitude of Target's reversal becomes clear when examining what the company had previously committed to. In the aftermath of George Floyd's murder, Target established an executive Racial Equity Action and Change committee, pledged to increase its Black workforce by 20% throughout the company and committed to spend more than $2 billion with Black-owned businesses by the end of 2025. Target was honored for its "outstanding commitment to achieving Diversity, Equity and Inclusion" in 2022 by the Executive Leadership Council, a prominent organization of global Black CEOs. The company had positioned itself as a leader in corporate social responsibility, with DEI central to its brand identity. The Backlash Begins The company has also faced intense customer backlash for its retreat on some diversity initiatives. Target's change has angered some customers who say the company's moves have given them whiplash. Anne and Lucy Dayton, daughters of Target's co-founder, publicly condemned the rollback, calling it a betrayal of the company's values. In an open letter, they criticized Target's abandonment of its long-standing DEI efforts, stating that corporate diversity isn't just about PR—it's a moral commitment. The Twin Cities Pride Festival cut ties with Target, canceling a major partnership and $50,000 in corporate funding. For a company headquartered in Minneapolis with deep ties to the local LGBTQ+ community, this represented a significant symbolic blow. The Boycott and Its Financial Impact The DEI rollback triggered something Target hadn't adequately anticipated: a sustained boycott campaign from customers who had previously been its most loyal supporters. Measuring the Damage Foot traffic to Target stores dropped for ten straight weeks, with a 7.9% year-over-year decline recorded by early April. The pullback was particularly sharp among Black and Hispanic consumers, who reduced visits at significantly higher rates. Customer visits to Target, Walmart and Costco have slowed over the last three weeks, but they have dropped most sharply at Target, according to Placer.ai, which uses phone location data to track visits. During the week of February 10, foot traffic to Target dropped 3.9% and 1.4% to Walmart. Target's first-quarter sales fell 2.8% to US$23.85bn, falling short of Wall Street expectations of $24.23 billion. While multiple factors contributed to the decline, Target acknowledged its move hurt its sales. The Shareholder Lawsuit In February, Target was hit with a class action lawsuit by the City of Riviera Beach Police Pension Fund, which alleged that Target misled investors by failing to disclose the potential risks of scaling back its DEI programs. Target shareholders filed a class action lawsuit, claiming Target defrauded them by "artificially inflated" stock prices and failing to warn investors about how removing DEI and ESG (environmental, social, and governance) policies could cause stock prices to plummet. The lawsuit represents a fascinating reversal of typical corporate litigation around DEI. Rather than shareholders suing because a company did too much DEI work, they're suing because the company abandoned DEI commitments without proper disclosure of the financial risks. The Costco Contrast Perhaps nothing illustrated Target's missteps more clearly than comparing its approach to that of warehouse retailer Costco, which faced similar pressure but chose a dramatically different path. A shareholder proposal to assess the "risks" of Costco's diversity practices was overwhelmingly rejected with more than 98% voting against it. Costco's leadership reaffirmed that DEI isn't just a box to check, it's central to their employee strategy and rooted in the company's core ethics. The market rewarded Costco's steadfastness. In the four weeks ending February 9, 2025, Costco welcomed nearly 7.7 million more store visits, while Target saw almost 5 million fewer during the same period. The surge was especially pronounced among Black and Hispanic/Latino households. The contrast couldn't be starker: Costco stood by its values and gained customers; Target wavered and lost them. The lesson about consistency and authenticity in corporate values appears painfully clear. The Leadership Transition Amid the crisis, Target is undergoing a significant leadership change that adds uncertainty to an already precarious situation. In August, Target CEO Brian Cornell announced he was stepping down after 11 years at the retailer. Cornell's tenure included tremendous highs—particularly during the pandemic retail boom—but ends with the company in one of its weakest positions in decades. Some industry analysts believed Target should bring in an outside voice to lead the company, but it opted for an internal candidate. Cornell will be replaced next year by Michael Fiddelke, Target's current chief operating officer. The decision to promote from within signals both continuity and constraint. On one hand, Fiddelke knows the company intimately and can move quickly without a learning curve. On the other hand, Target's problems might require the fresh perspective and willingness to challenge entrenched assumptions that an outsider could provide. Some analysts worry that an insider may struggle to implement the dramatic changes Target needs, having been part of the management team that steered the company into its current difficulties. The Turnaround Plan: Too Little, Too Late? Target is attempting to reverse its fortunes through a combination of price cuts, store investments, and technological partnerships—but early indications suggest these measures may be insufficient. Pricing and Merchandise Strategies Heading into the holiday season, Target said it dropped prices on 3,000 everyday products and foods, and it plans to have double the number of new items in its holiday product assortment than last year. The retailer says it is offering 10,000 new items starting at US$1, with the majority priced under US$20. This aggressive value positioning represents a direct response to customer feedback about prices, but it also raises questions about profit margins and whether Target can maintain quality at these price points. The challenge is that price cuts alone won't differentiate Target from competitors who've built their entire business models around low prices. Walmart's scale advantages mean it can often undercut Target's promotional prices while still maintaining profitability. Capital Investment Surge On Wednesday, the company said it will increase spending by 25%, to $5 billion, next year to remodel stores. This massive capital commitment aims to address complaints about cluttered, outdated stores that lack the design appeal that once defined the Target shopping experience. Store remodels could help, but they're a slow process that won't yield results for quarters or even years. Meanwhile, Target continues bleeding customers and market share to faster-moving competitors. The OpenAI Partnership Target also announced a partnership with OpenAI to let customers shop on Target in ChatGPT. This represents an intriguing bet on AI-powered shopping, allowing users to browse and purchase Target products directly through conversational interfaces. The OpenAI integration could provide a differentiated shopping experience, particularly for younger, tech-savvy consumers. However, it's unclear whether conversational AI shopping will drive meaningful traffic and sales, or if it's primarily a marketing gimmick that generates headlines without moving the bottom line. The Pride Month Precedent Target's current crisis has eerie parallels to its 2023 Pride Month controversy—and the company's response then may have set the stage for today's problems. In 2023, several viral posts on social media claimed that Target's "tuck-friendly" swimsuits for transgender customers were being sold to children, which the Associated Press debunked. The response became hostile, with violent threats levied against Target employees and damaged products and displays in stores. Target opted to remove items that caused the most "volatile" reaction from opponents, which the company said was done to protect its workers' safety. But Target's response frustrated some supporters of gay and transgender rights, who said the company caved to bigoted pressure. Target's quarterly sales fell following Pride Month in 2023, although they recovered in the following quarters. The company learned it could weather short-term controversy—but perhaps drew the wrong lesson, believing that retreating from values commitments would minimize future conflicts. Instead, the 2025 DEI rollback demonstrated that abandoning principles under pressure satisfies no one. Conservative critics still view Target with suspicion based on past support for LGBTQ+ causes, while progressive customers feel betrayed by what they see as opportunistic abandonment of diversity commitments. The Bud Light Comparison The big question is whether the reaction and boycott calls will cause long-term damage to Target, like they did to Bud Light, or fade away. In 2023, Bud Light's parent company A-B InBev lost as much as $1.4 billion in sales because of right-wing backlash to Bud Light's brief partnership with transgender influencer Dylan Mulvaney. The boycott proved remarkably durable, with Bud Light losing its position as America's best-selling beer—a status it hasn't recovered. However, there are key differences. One of the key reasons the Bud Light boycott was successful was because it was very easy for customers to substitute Coors or Miller without much sacrifice, said Jura Liaukonyte, a marketing professor at Cornell University who studies consumer boycotts. A boycott campaign against Target could be hard to sustain because other chains that consumers might switch to like Walmart or Amazon have also rolled back DEI programs. This suggests the boycott's impact might be more limited than Bud Light's experience. Yet Target faces a unique challenge: Target is under more heat than companies like Walmart, John Deere or Tractor Supply because it went further in its DEI efforts, and it has a more progressive base of customers than those companies. The retailer cultivated a brand identity closely tied to social progressivism, making the perceived betrayal more acute for its customer base. The Tariff Threat Looms As if Target's self-inflicted wounds weren't enough, external economic pressures threaten to compound the company's difficulties. Brian Cornell joined the CEOs of Walmart and Home Depot in privately warning the White House that tariffs would likely lead to price hikes and empty shelves. In a closed-door meeting with President Trump in April, the CEOs warned him that his aggressive trade policy would disrupt supply chains. Target has not yet offered specifics on tariffs' impact on prices, but said that it was looking at different ways to offset those costs. The company faces an impossible dilemma: absorb tariff costs and sacrifice already-thin margins, or pass them to consumers and further damage price competitiveness against Walmart and Amazon. Given Target's current weakness, it has less flexibility to navigate this challenge than stronger competitors. Walmart's massive scale and diverse supplier base give it more options for mitigating tariff impacts, potentially widening the competitive gap further. Can Target Come Back? "We're acting with urgency to make the changes and investments to position Target for sustainable and profitable growth," Fiddelke said on a call with analysts Wednesday. The question is whether urgency alone is sufficient, or if the company's challenges have become too deeply entrenched. The Path Forward Target needs to execute on multiple fronts simultaneously: Rebuild Trust with Core Customers: The DEI controversy has damaged relationships with progressive consumers who once viewed Target as a values-aligned brand. Target recently highlighted its ongoing partnership with the Russell Innovation Center for Entrepreneurs (RICE), which supports Black small business founders, perhaps signaling attempts to repair these relationships without explicitly reversing the DEI rollback. Fix the Value Proposition: Target must find a way to offer compelling value without simply trying to out-cheap Walmart. This might mean leaning harder into exclusive brands, superior store experience, or differentiated merchandise that justifies slightly higher prices. Streamline Operations: The 1,000-employee layoff suggests management recognizes bloat in corporate operations. Further efficiency improvements may be necessary to fund price investments and store upgrades without destroying profitability. Leverage Digital Advantages: Target's investment in same-day delivery, curbside pickup, and now AI-powered shopping could provide differentiation if executed well. The company needs these capabilities to offset advantages competitors hold in other areas. Navigate Leadership Transition: Fiddelke must quickly establish credibility and vision while managing a demoralized workforce and skeptical investor base. His first few quarters will be critical in determining whether he can lead Target's revival. The Pessimistic Case Some analysts believe Target's problems may be too fundamental to solve through incremental improvements. The company's positioning—neither as cheap as Walmart nor as differentiated as specialty retailers—leaves it vulnerable to being squeezed from both directions. Target's physical store footprint, once an asset, increasingly looks like a liability given high real estate costs and the shift to online shopping. Unlike Walmart, which can leverage stores for omnichannel fulfillment while primarily serving price-conscious customers, Target's stores serve a less clearly defined mission. The DEI controversy revealed that Target lacks a coherent identity it's willing to defend. A brand that stands for everything ends up standing for nothing, and customers may simply drift away to retailers with more authentic, consistent positioning. The Optimistic Case Bulls on Target point to the company's strong brand recognition, valuable real estate locations, and history of successful reinventions. Target has faced existential crises before—including a devastating 2013 data breach and subsequent CEO departure—and recovered to reach new heights. The current crisis, while severe, is happening when Target still has substantial financial resources and brand equity to deploy. The $5 billion store remodel investment and aggressive pricing moves show management recognizes the urgency and is willing to spend to fix problems. Target's customer base, while alienated, hasn't disappeared. Many shoppers still prefer Target's aesthetic and shopping experience when price differentials aren't too large. If the company can close the value gap through a combination of lower prices and improved merchandise, customers may return. The leadership transition, while risky, also creates opportunity. Fiddelke has a mandate for change and won't be blamed for past mistakes. He can make difficult decisions—potentially including reversing the DEI rollback or making other strategic pivots—without being seen as repudiating his own legacy. Broader Implications for Retail Target's struggles illuminate broader challenges facing American retail in 2025: The Value Imperative: In an inflationary environment where consumers feel financially strained, value trumps virtually every other consideration. Retailers that can't credibly claim to offer the best prices face existential challenges. The Cost of Inconsistency: Target's vacillation on social issues demonstrates the dangers of positioning a brand around values without being prepared to defend those values under pressure. Authenticity matters, and customers punish perceived opportunism. The Scale Advantage: Walmart and Amazon's dominance continues growing because their scale creates self-reinforcing advantages in pricing, logistics, and supplier negotiations. Mid-sized retailers struggle to compete without clear differentiation. The Physical Store Question: As e-commerce penetration deepens, physical retailers must justify their real estate costs by offering experiences or services that online competitors can't match. Simply displaying merchandise isn't enough anymore. The Leadership Challenge: Retail CEO tenures have shortened as companies face constant disruption. The pressure to deliver quarterly results while simultaneously executing multi-year transformations creates nearly impossible expectations. What Happens Next? Target's holiday season performance will be crucial. Strong results could provide breathing room for longer-term initiatives, while continued weakness might force more dramatic actions like store closures, asset sales, or even merger discussions. The company has cut its forecast for the rest of the year, warning that sales would slip further as customers pulled back on spending amid an uncertain economic environment. This guidance suggests management expects conditions to worsen before improving. The 2026 fiscal year will be make-or-break for Fiddelke's tenure and perhaps for Target's independence. If the turnaround plan fails to show tangible progress in rebuilding traffic and sales, activist investors may push for more dramatic changes, potentially including a sale of the company. Possible scenarios range from successful turnaround (Target stabilizes and gradually rebuilds) to continued decline (market share loss accelerates, forcing store closures and restructuring) to strategic alternatives (merger with another retailer or private equity buyout). Conclusion: A Brand at a Crossroads Target's 2025 crisis represents more than just a bad quarter or temporary setback. It's a reckoning with fundamental questions about the company's identity, value proposition, and ability to compete in a brutally competitive retail environment. The company that once epitomized "cheap chic" and positioned itself as America's favorite mass-market retailer now finds itself adrift—unable to match Walmart's prices, Amazon's convenience, or specialty retailers' differentiation, while simultaneously alienating core customers through inconsistent values signaling. Target may have hit rock bottom—but whether this represents the low point before recovery or merely another step in a longer decline remains to be seen. The coming months will determine whether Target can rediscover its identity and rebuild customer trust, or if the retailer will become a cautionary tale of strategic drift and squandered brand equity. For competitors, Target's struggles offer both opportunity and warning. Opportunity to capture disaffected customers and market share, but warning about the dangers of positioning missteps, inconsistent values, and underestimating the importance of value in consumers' minds. For Target employees, investors, and the millions of customers who once loved shopping at those distinctive red-and-white stores, the hope is that this crisis will catalyze the changes necessary for revival. The ingredients for success still exist—valuable real estate, strong brand recognition, operational capabilities, and customer goodwill that, while damaged, hasn't been completely destroyed. Whether Target can leverage these assets to engineer a turnaround or will continue its slide into irrelevance depends on decisions being made right now in Minneapolis headquarters. The next chapter of Target's story is being written in real-time, and the ending remains uncertain.