Is Target's (TGT) Turnaround Strategy Enough to Justify a Buy?

The retail sector in 2025 is navigating a complex landscape marked by softening consumer demand, inflationary pressures, and intensifying competition. For Target Corporation (TGT), the stakes are high as it executes a multiyear turnaround strategy aimed at restoring growth and value. With a 1.5% decline in Q3 2025 net sales and a 2.7% drop in comparable sales, the retailer faces mounting scrutiny. Yet, its strategic pivot toward value-driven offerings, AI-driven operational efficiency, and omnichannel innovation raises critical questions: Is this blueprint sufficient to justify a "buy" recommendation in a sector where Walmart's dominance continues to widen the gap?

A Strategic Rebalancing: Value, Technology, and Omnichannel

Target's turnaround strategy hinges on three pillars: value perception, operational modernization, and omnichannel expansion. The company has slashed prices on thousands of products to attract cost-conscious shoppers, a move that aligns with its focus on affordable home décor and everyday essentials according to analysts. This shift reflects a recalibration from discretionary categories like fashion, where sales have lagged as reported.

Simultaneously, Target is investing heavily in AI to refine its merchandise assortment and inventory management according to corporate reports. Tools like Target Trend Brain aim to predict consumer trends, enabling faster, bolder decisions in product curation. These efforts are complemented by supply chain reforms, including AI-powered inventory systems to reduce out-of-stocks and Shipt-driven delivery solutions to expand next-day delivery to half the U.S. population.

The omnichannel component is equally ambitious. By 2030, Target plans to grow third-party digital sales from $1 billion to $5 billion, leveraging its Target Plus marketplace and in-house media company, Roundel. Personalized digital experiences, such as curated homepages and tools like Store Mode and List Scanner, aim to enhance convenience. These initiatives are part of a $15 billion growth plan by 2030, signaling a long-term commitment to digital transformation.

Financials and Analyst Sentiment: A Mixed Picture

Despite these strategic strides, Target's financials tell a cautionary tale. Its Q3 2025 adjusted EPS of $1.78 fell 4% year-over-year, while the company revised its 2025 adjusted EPS guidance downward to $7–$8 according to market analysis. The trailing P/E ratio of 11.71 and forward P/E of 12.38 as reported suggest undervaluation, but analysts remain divided. As of late 2025, 36 analysts have issued ratings: 22 "Hold," 10 "Buy," and 4 "Sell" according to market data. The average price target of $102.62 implies an 8.05% upside from the current $94.97 stock price, but bearish sentiment persists due to weak sales and operational challenges as noted by analysts.

Walmart's outperformance exacerbates the uncertainty. With Q3 sales growth and raised guidance, Walmart's "Strong Buy" rating from Wall Street contrasts sharply with Target's mixed outlook according to retail analysis. Analysts attribute Walmart's success to its dominance in both essentials and discretionary categories, as well as strategic rebranding efforts according to market reports. For Target, the path to recovery hinges on executing its turnaround amid a sector-wide slowdown.

The Case for Caution and Long-Term Optimism

While Target's strategy is ambitious, execution risks remain. The retail sector's macroeconomic headwinds-tariff pressures, inflation, and shifting consumer preferences-pose ongoing challenges. Additionally, Walmart's scale and operational efficiency create a formidable benchmark. However, Target's focus on store remodels, private-label strategies 23% of revenue from food and beverage, and digital investments could yield long-term gains.

Analysts like Oppenheimer argue that Target's capital spending plans for FY'26-targeting store renovations and technology-position it for competitive advantage according to financial reports. Jefferies' "Buy" rating with a $115 price target underscores confidence in these initiatives. Yet, the bearish camp, including Bank of America's "Underperform" rating, highlights the urgency of near-term results.

Conclusion: A "Hold" with Conditional Upside

Target's turnaround strategy is a compelling blend of value-driven merchandising, AI-driven efficiency, and omnichannel innovation. However, the current financial headwinds, competitive pressures, and mixed analyst sentiment suggest a "Hold" recommendation is prudent. The stock's undervaluation and long-term growth plans offer potential for a "Buy" if the company can stabilize sales and deliver on its 2030 vision. For now, investors should monitor execution progress and macroeconomic shifts, as the retail sector's volatility will likely dictate Target's trajectory.