Target has been fighting a war on multiple fronts.
The retailer has been dealing with the same economic uncertainties all of its rivals have faced. Labor costs have increased, tariffs loom over everything, and consumer confidence has not been strong.
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Target has also been dealing with customers who think it's too woke and some who think it's not woke enough.
That has led to some business struggles for the department store chain.
First quarter net sales came in at $23.8 billion, a drop from $24.5 billion in 2024. It also saw its year-over-year earnings per share come in at $1.30 per share, down from $2.03 in the year-ago period.
CEO Brian Cornell tried to paint a positive picture of the numbers.
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“While our sales fell short of our expectations, we saw several bright spots in the quarter, including healthy digital growth, led by a 36% increase in same-day delivery through Target Circle 360, and our strongest designer collaboration in more than a decade, kate spade for Target,” he said in the earnings release.
The challenge is that Target customers are simply buying less when they visit. Comparable sales decreased 3.8% in the first quarter, reflecting a comparable store sales decline of 5.7% and comparable digital sales growth of 4.7%.
Target wants to go direct
Target has reportedly been testing shipping directly from its factories to its customers. In theory, that can cut multiple steps of out its shipping process.
Currently, Target ships from its distribution centers and its stores. That means that the items have to go from factory to distribution center, and sometimes to store before being sent to the customer.
This model would mirror how rivals Temu and Schein ship their goods and, in theory, give Target a tool Amazon and Walmart don't offer.
“Targeting apparel, household goods, and other non-food items is at the top of Target’s list, mirroring both Shein and Temu’s focus on the same. Given the lengthier delivery times (and turbulent customs policies concerning U.S.-bound shipments of Chinese origin), the focus on these categories is seemingly logical,” RetailWire reported.
What's also somewhat confusing about this potential move is that Walmart and Amazon, by nature of their size and shipping networks, might still be able to offer cheaper prices.
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The bigger problem is that Target is exploring this change at a time when it's no longer beneficial.
The United States used to exempt shipments of goods valued at under $800 from duty, tariffs, and taxes. That exemption was removed by the Donald Trump administration in June.
Target (TGT) , however, could be betting that the president, who has been known to waver on decisions, ultimately decides to reinstate the exemption.
Retail experts question Target
RetailWire's community of retail experts seemed skeptical at this being a good idea for Target.
“Why this, why now? I can’t imagine this is Target’s next best move when it arguably hasn’t maxed out opportunities with its online marketplace and with so many unforced errors still to be sorted out. I feel a major distraction coming when Target is least prepared to manage it,” wrote Carol Spieckerman.
Frequent contributor Paula Rosenblum was even more harsh.
“I can’t figure out what has happened to Brian Cornell’s judgment. He was doing so incredibly well. But the past year has been noted as misstep after misstep,” she posted.
Retail expert Neil Saunders also thinks that direct factory shipping does not make sense for Target.
“Target arguably has bigger fish to fry than this. There is also a point to be made that, if not executed carefully, this could cannibalize mainstream sales at Target,” he shared.
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Mohamed Amer had a more nuanced approach to what Target should do.
“The elimination of the de minimis exemption creates significant headwinds for Target’s factory-direct ambitions. But the real question isn’t regulatory — it’s strategic: what customer problem does Target think it’s solving?” he wrote. “Target’s strength has always been curated discovery through edited assortments—the antithesis of the factory-direct approach’s overwhelming catalog. Customers choose Target for the intersection of design, accessibility, and experience, not endless selection at rock-bottom prices.”
