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Target and Best Buy say prices will go up because of Trump’s tariffs

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Two of America’s largest retailers, Target and Best Buy, warned Tuesday that prices will increase following President Donald Trump’s tariffs on imported goods from Mexico, Canada and China.

Trump’s blanket 25% tariffs on Mexico and Canada took effect on Tuesday. Trump also doubled the tariff on all Chinese imports to 20% from 10%. Those import taxes sit atop existing tariffs on hundreds of billions in Chinese goods. China and Canada immediately retaliated with tariffs on American goods, and Mexico is planning to announce retaliatory measures.

The Trump administration said the tariffs were necessary to stem the flow of fentanyl into the United States. But the tariffs threaten to raise the prices Americans pay for a wide array of goods that are imported from the three nations, which collectively import more than 40% of all US goods by value.

Target CEO Brian Cornell said in an interview with CNBC Tuesday that Trump’s tariffs on Mexico may force the company to raise prices on fruits and vegetables as soon as this week.

Cornell said Target relies heavily on Mexican produce imports during the winter. “Those are categories where we’ll try to protect pricing, but the consumer will likely see price increases over the next couple of days,” he said.

Target also said that “tariff uncertainty” will impact its profit this quarter.

Best Buy also expects tariffs to cause prices to rise. China and Mexico are the top sources for consumer electronics at Best Buy.

“We’ve never seen this kind of breadth of tariffs. This, of course, impacts the whole industry,” Best Buy CEO Corie Barry said on a call with analysts Tuesday. The company expects its vendors to pass along some tariff costs to retailers “making price increases for American consumers highly likely.”

Target said its sales declined in February and it expects sales to only grow around 1% this year.

Last month, sales were “soft” as cold weather impacted clothing spending. But “declining consumer confidence impacted our discretionary assortment overall,” Jim Lee, Target’s chief financial officer, said in a statement.

Target is also under pressure from consumers frustrated by its shift away from diversity, equity and inclusion (DEI) efforts.

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. Target said it remained committed to “creating a sense of belonging for our team, guests and communities” and also stressed the need for “staying in step with the evolving external landscape.”

Target’s retreat sparked anger from progressive customers and boycott calls, particularly from Black consumers.

Rev. Jamal Bryant of New Birth Missionary Baptist Church in Stonecrest, Georgia, has called for 100,000 people to begin a 40-day boycott of Target on Wednesday to coincide with the start of Lent. Participants are encouraged to purchase products from Black-owned businesses during this period.

There are signs that the blowback from Target’s move is impacting the company.

Customer visits to Target, Walmart and Costco have slowed over the last four weeks, but they have dropped the most at Target, according to Placer.ai., which uses phone location data to track visits. The slowdown could also be attributed to weather, economic conditions and other variables, Placer.ai cautioned.

During the week of February 17, the latest week available, foot traffic to Target dropped 7.9% and 5.2% to Walmart. Foot traffic to Costco, which has stood by its DEI policies, increased 4.8%.

The data “shows a clear drop in traffic in late January into mid-February following the company’s step back from DEI,” Joseph Feldman, an analyst at Telsey Advisory Group, said in a note to clients last week.

This story has been updated with additional context and developments.

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Backlash to Target’s DEI pullback

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Good earnings news wasn’t great news for Target (NYSE: TGT) stock this morning, after the big-box retailer announced a sizable earnings beat Tuesday, then saw its stock sell off.

Analysts forecast Target would earn $2.25 per share on fiscal fourth-quarter sales of $30.4 billion (Target’s fiscal year ended Feb. 1, 2025). In fact, Target earned $2.41 per share, and sales exceeded $30.9 billion. Regardless, Target shares were down 5.2% through 10 a.m. ET.

Target noted that its same-store sales grew 1.5% year over year, and that quarterly earnings of $2.41 were “near the high end” of company guidance. But Q4 2023 contained an additional week of data when compared to Q4 2024. As a result, total sales and earnings declined — because Target had less time to make sales and earn profit.

Year over year, therefore, quarterly sales declined 3% and net profit declined 19%. For the full year, which also contained one week less in fiscal 2024 than in fiscal 2023, net sales fell 1% to $106.6 billion, and net profit was also down 1% at $8.86 per share.

Investors who are selling off Target stock today may be responding to these shrinking numbers in particular.

The good news is that the calendar won’t be a drag on sales or earnings in 2025. Turning to guidance, Target forecasts 1% sales growth in 2025, with a “modest” increase in operating profits helping to push per-share profits up to somewhere between $8.80 and $9.80.

Taken at the midpoint, this implies that earnings might grow as much as 5% this year, to about $9.30 per share. That’s significantly ahead of expectations, with Wall Street only expecting Target to earn about $8.70 per share.

Assuming all goes as planned then, Target stock currently sells for an undemanding 12.4 times current-year earnings. With a 5% earnings growth rate and a 3.7% dividend yield, it doesn’t quite make the stock cheap enough that I’d call it an obvious buy — but I don’t see any compelling reason to sell Target, either.

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Target Q4 earnings

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Target posts strong Q4 profits and sales, but warns of cautious spending as tariffs take hold

A Target parking lot in Emeryville, Calif., Friday, Feb. 28, 2025. (AP Photo/Godofredo A. Vásquez)

NEW YORK (AP) — Sales and profits slipped for Target during the crucial holiday quarter as customers held back on spending, and the company said there will be “meaningful pressure” on its profits to start the year because of tariffs and other costs.

The retailer beat most estimates, however, but shares fell 6% in morning trading as the overall market sell-off continued. Target also said that sales declined in February in part because of brutal weather that hurt apparel sales and declining consumer confidence. It also anticipates that sales could be unchanged for the year amid increasing economic uncertainty.

The company’s fiscal fourth-quarter results came on the same day that the discounter is holding its annual investor meeting in New York where it is updating analysts on its store expansion and merchandising plans. Target said it plans to invest anywhere from $4 billion to $5 billion this year in new store expansions, speeding up its online delivery and shortening its production cycle. The company said it plans to add 20 new stores this year, and it expects to add $15 billion in sales by 2030.

But tariffs and economic uncertainty loomed over the results.

President Donald Trump’s long-threatened tariffs against Canada and Mexico went into effect Tuesday, pushing markets in Asia, Europe, and the U.S. lower, and setting up costly retaliations by the United States’ North American allies, not to mention China.

China said Tuesday that it will impose additional tariffs of up to 15% on imports of key U.S. farm products, including chicken, pork, soy and beef, and also expanded controls on doing business with key U.S.

Americans have been pulling back on spending and retailers face a lot of uncertainty in the year ahead.

Target said that back in 2017, 60% of its products were sourced from China. It’s now at 30%. The company is on its way to reduce that number to 20%, Rick Gomez, Target’s chief commercial officer told investors on Tuesday. That’s four years ahead of schedule. The company is shifting to sourcing in Guatemala and Honduras and is looking to sourcing in the U.S., he said.

Consumers have already been pulling back on discretionary spending because the costs of groceries have risen so sharply. That is an area where Target can be vulnerable because so much of its sales come from discretionary items like clothing, electronics purchases.

Target reported net income of $1.1 billion, or $2.41 per share, far better than the $2.26 that Wall Street was expecting, according to a survey by FactSet. That is down from the $1.38 billion profit the company reported in the same period last year, though the most recent quarter had one fewer week of sales.

Revenue fell to $30.91 billion, from $31.9 billion, but that also beat expectations.

Target said Tuesday its earnings per share for the current year will be between $8.80 to $9.80. Wall Street had been projecting per-share earnings of $9.29 for the year. The company expects net sales to be up 1% and comparable sales to be flat this year.

During the most recent quarter, comparable sales — those from stores and digital channels operating for at least 12 months — rose 1.5%. That was higher than the 0.3% gain during the third quarter. Target posted a 2% gain in the second quarter and a 3.7% drop in the first quarter.

Speaking about the current quarter, Chief Financial Officer Jim Lee said sales should pick up.

“We will continue to monitor these trends and will remain appropriately cautious with our expectations for the year ahead,” Lee said.