Dive Brief:
- With potential for long-term upside, Target is cutting prices on thousands of products and working to compete beyond pricing, “while allowing Walmart to maintain its low-price leadership,” according to a Thursday note from Jefferies analysts. The mass retailer’s focus on pricing as well as merchandising newness is “intended to prioritize value perception without sacrificing differentiation,” Jefferies wrote.
- The analysts — who met with Target’s Vice President of Investor Relations John Hulbert — said management is trying to balance its offerings by focusing on more affordable decor items and avoiding an overcommitment to higher ticket products such as artificial trees.
- Tariffs are likely to continue being a driving force on gross margin pressure in the near term, though that could change based on the ever-evolving outlook of new tariff policies.
Dive Insight:
Target is beating the drum on its turnaround efforts related to merchandising authority and technology — and those efforts aren’t going unnoticed by some analysts.
“Looking ahead, [Target] sees share-gaining opportunities by reinforcing its authority in product innovation and in-store experience, while leveraging technology for greater efficiency,” Jefferies analysts noted. “The focus remains on driving differentiation through merchandising and experience rather than competing solely on food and price. In the longer term, [management] expects growth at Walmart, Amazon, and Costco to continue but also believes that [Target] has opportunities to capture share ahead, supported by enterprise initiatives.”
The company’s third quarter earnings released in November were frustrating for executives, though leadership reiterated its commitment to core transformation priorities. Target at the time announced it would invest an additional $1 billion into the business in 2026; about $5 billion in total capital expenditure is expected, some of it intended to be used for technological advancement.
Incoming CEO and current COO Michael Fiddelke stressed the importance of understanding how customers “view value” to analysts during an earnings call.
“They want quality and price to coexist, something we do particularly well through our balance of must-have national brands, our exclusive owned brand portfolio and our curation of emerging brands,” Chief Commercial Officer Rick Gomez added on the call. “As part of our work to solidify our merchandising authority, we will continue to elevate our assortment to lead with trend while always considering affordability and value.”
Throughout the latter half of 2025, that approach has showed itself through exclusive merchandise announcements, new store concepts and select pricing moves.
Target formally unveiled its updated design-focused SoHo store in New York City this month, which includes rotating merchandise assortments and a refreshed store layout. Ahead of the Thanksgiving holiday, the retailer also announced price cuts on about 3,000 food, beverage and essentials products. Target also kicked off the holiday season with the release of around 20,000 new products, over half of which are exclusive to the retailer.
