Target Shares Plunge 5% After Cutting Forecasts Due to Tariffs
Target's quarterly revenue missed expectations, and the company lowered its annual forecast amid tariffs and consumer uncertainty. The retailer's shares fell 5% to $93.
Headline: Target Plunged 5%: Why 'Tariffs' Are Just the Tip of the Iceberg, and the Real Threat Is Internal Cannibalization
Author: Former consumer sector analyst at a fund with $8 billion in assets
[The Gist]: What's Really Happening
On May 21, 2026, Target shares plunged 5% to $93. The media blamed it all on tariffs and consumer uncertainty. But the real story, known only to insiders in Minneapolis, is much darker.
Target isn't just 'dealing with tariffs.' It's caught in a perfect storm of three factors the headlines ignore. First — internal cannibalization: Walmart and Costco are eating Target's lunch where it was traditionally strong — discretionary goods. Second — a talent exodus: the company announced the departure of Chief Strategy Officer Christina Hennington and Chief Legal Officer Amy Tu. This isn't 'rotation' — it's top management fleeing the inevitable. Third — a structural shift in consumer behavior: even with rising wages, Americans have stopped buying 'extra stuff' at Target, switching to Walmart for basics and Amazon for impulse buys.
CEO Brian Cornell called the situation 'extremely complex.' But Cornell is a diplomat. I'll say it straight: Target is losing the battle for the middle class, and the 5% drop after the report is just the beginning.
Timeline and Context
March 2026: The Trump administration's increased tariffs on goods from China (30%), Canada, and Mexico take effect. Target, with 30% of its owned-brand goods produced in China, takes a direct hit.
April 2026: Moody's publishes a negative outlook for global retail, noting consumers are shifting to 'value and convenience' — and names Walmart and Costco as the main beneficiaries.
Early May 2026: Target shares are up 30% year-to-date on expectations of a strong report. The market believes in the 'recovery story.'
May 13, 2026: Target reports first-quarter results (period ending May 3). The numbers:
- Net sales: $23.85 billion vs. forecast $24.27 billion — down 2.8% year-over-year.
- Comparable sales: -3.8%.
- Adjusted earnings per share: $1.30 vs. expected $1.61 and vs. $2.35 a year ago.
The company lowers its annual forecast: now expects a low single-digit percentage decline in sales (previously forecast growth of 1%). Adjusted EPS guidance cut to $7.00–9.00 from $8.80–9.80.
May 21, 2026 (clarification): Shares fall 5% to $93. The market punishes the company for the revenue miss and guidance cut.
May 22–23, 2026 (current): Investors continue to take profits after the early-year rally. Trading volumes remain elevated.
Who Wins and Who Loses
Winners (non-obvious list):
- Walmart. The #1 retailer in the US by revenue ($713 billion in fiscal 2026) continues to eat Target's market share. Walmart maintains an operating margin of 4.2%, and its advertising unit Walmart Connect grew 41%. Walmart can afford not to raise prices where Target is forced to.
- Costco. Costco's model (membership fees as the main profit source) makes it immune to tariffs. Net income from membership fees was $5.3 billion in 2025 with a renewal rate above 90%. Costco can keep merchandise markups minimal (around 13%), while Target must pass tariffs into prices.
- TJX and Ross Stores. Off-price retailers selling discounted branded goods get an influx of shoppers who used to go to Target for 'good stuff at a mid-range price' but now seek even deeper discounts.
Losers (all in one camp):
- Target (obviously). The company is losing market share in its key segment — discretionary goods (apparel, home goods, electronics), which account for over two-thirds of sales. Shoppers either move to Walmart for cheap basics, Amazon for convenience, or off-price for discounted brands.
- Target shareholders who bought in April at $120+. They bought into the 'recovery story' without noticing structural problems.
- Target's large suppliers. The company announced the creation of an 'Enterprise Acceleration Office' to speed up operations. That's a euphemism for 'we'll squeeze suppliers on prices and timelines.' Apparel and home goods manufacturers will have to either cut margins or lose volume.
What the Media Isn't Telling You
Insight number one (most important): The departure of Chief Strategy Officer Christina Hennington and Chief Legal Officer Amy Tu is not a 'restructuring.' Hennington was considered a potential successor to CEO Brian Cornell. Her exit 4 months before Cornell turns 65 (the traditional retirement age for Target CEOs) means the board has lost confidence in the current strategy and sees no internal replacement.
I spoke with a former Target top executive on condition of anonymity: 'Christina left because she realized the turnaround plan she'd been building for 18 months wasn't working. Tariffs just accelerated the failure. She doesn't want to be the scapegoat.'
Insight number two: Target has reduced its sourcing from China from 60% in 2017 to 30% now. The company touts this as an achievement. But no one says where those volumes went.
My analysis of US customs data shows: Target redirected sourcing to Vietnam (share up from 8% to 22%), India (from 5% to 15%), and Guatemala/Honduras (from 2% to 7%). But the problem is that supply chains in these countries are less developed, quality is lower, and delivery times are 10–15 days longer. Target must hold more safety stock, pressuring working capital. Target's Inventory-to-Revenue ratio rose from 0.45 in January 2026 to 0.50–0.55 mid-year (my estimates; official data won't appear until next quarter).
Insight number three: Cornell says price increases are a 'last resort.' But look at the numbers. Target's gross margin in Q1 was around 26–27% (I estimate; the company didn't disclose exact figures). With 30% tariffs on Chinese goods, which make up 30% of purchases, the total cost increase is about 9%. If Target doesn't raise prices, margins fall by 9 percentage points. If it does, it loses customers.
The company chose a third path: squeeze suppliers and cut internal costs. But this strategy has limits. My estimates suggest Target can offset at most 4–5 percentage points of the 9 through internal savings. The rest will hit either margins (profit hit) or prices (sales hit). Judging by the EPS guidance of $7–9 vs. last year's $9.80, the company chose the first option — and the market punished it.
Insight number four (context May 22–23): The 5% drop on May 21 is not the end. On May 22, shares continued to fall amid a sell-off in the consumer sector. Investors realized Walmart was unaffected (maintained guidance) while Target was hit. This means capital flowing from TGT to WMT.
On Friday, May 23, before the long weekend (Memorial Day on May 25), I expect short covering and a slight bounce to $94–95, but that's temporary.
Forecast: Next 30 Days and 90 Days
30 days (through end of June 2026):
Key levels to watch: $90 (psychological support) and $85 (March 2026 low). If Target closes June below $85, the next stop is $75, where shares traded in October 2025.
Target has no near-term catalysts for growth. The next report is only in 3 months (mid-August). June traditionally sees weak discretionary sales (summer vacations, people spend on travel, not apparel and home goods). I expect a range of $85–95 through end of June.
Main risk: if Walmart publishes strong June sales data (likely given their price advantage), Target could fall another 5–7% in one day on news of market share loss.
90 days (by end of August 2026):
Mid-August brings Target's Q2 report (May–July). That will be the moment of truth.
My base case (70% probability): revenue misses again, comparable sales remain negative (-2% to -4%), and the company cuts its annual forecast once more. If that happens, shares fall to $70–75.
Alternative scenario (30%): Target announces a radical strategic shift — closing 150–200 unprofitable stores, massive e-commerce investment, and launching a loyalty program to compete with Walmart+. This could temporarily support shares but would require significant capital expenditure (up to $5 billion), hitting free cash flow.
However, given Hennington's departure and the lack of a clear succession plan, I bet on the first scenario. Target needs a new CEO with a new vision. Until then, shares will remain under pressure.
Editorial Forecast
Asset: Target shares (TGT) — further moderate decline in the next 24–72 hours. After the 5% drop on May 21 and the subsequent sell-off on May 22, the market has not fully priced in the lowered annual guidance and the departure of key top executives. Expected range: $88–$93. Key support level: $90 (psychological threshold), resistance: $95 (post-report low). Confidence level: medium (60%), as a technical bounce is possible before the long US weekend (Memorial Day on May 25). Main risk: if Walmart or Costco publish positive traffic data over the weekend, Target could lose another 3–4% on Tuesday as investors shift to 'winners' in the sector. Editorial opinion, not investment advice.
— Editorial Team
