Target Corporation (NYSE:TGT) stock slipped in early trading on Thursday as the retailer reported a third-quarter profit beat but posted underwhelming sales and trimmed its full-year earnings outlook heading into the crucial holiday stretch.
At the same time, the big-box chain is leaning into an attention-grabbing artificial intelligence push, wiring its aisles into ChatGPT through an expanded OpenAI partnership.
The company reported third-quarter adjusted earnings per share of $1.78, beating the analyst consensus estimate of $1.72.
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Quarterly sales of $25.27 billion (down 1.5% year over year) missed the Street view of $25.337 billion. This reflected a merchandise sales decrease of 1.9%.
Expands AI Partnership With OpenAI
In a separate release, Target highlighted a deepening partnership with OpenAI, unveiling a new Target app inside ChatGPT that will offer curated recommendations, multi-item cart building, and checkout via Drive Up, Order Pickup, or shipping.
The retailer is already using ChatGPT Enterprise across its headquarters, with 18,000 employees leveraging the platform to speed up workflows and enhance support tools.
Target said OpenAI’s models power internal solutions like Agent Assist, Store Companion and Gift Finder, enabling faster issue resolution and more personalized shopping. The company noted that AI is increasingly shaping supply-chain forecasting, store operations and digital experiences.
Metrics
Non-merchandise sales, however, rose nearly 18%, with strong double-digit gains in Roundel, memberships and marketplace.
Digital sales grew 2.4%, driven by over 35% growth in same-day delivery through Target Circle 360. Food & Beverage and Hardlines (“Fun 101”) saw growth, while discretionary categories remained soft.
Comparable sales decreased 2.7% in the third quarter, reflecting a comparable store sales decline of 3.8%, partially offset by comparable digital sales growth of 2.4%.
Third quarter operating income, which includes the impact of non-recurring items, was $900 million, 18.9% lower than last year. The operating margin rate was 3.8% (including non-recurring items), compared with 4.6% in the year-ago period.
Third-quarter gross margin was 28.2%, slightly below last year’s 28.3%, as higher markdowns more than offset benefits from advertising growth, lower shrink, and supply chain efficiencies.
The company’s long-term debt and other borrowings expanded to $15.366 billion at the end of the third quarter, compared with $14.346 billion in the year-ago period.
Target exited the quarter with cash and equivalents worth $3.822 billion, higher than $3.433 billion in the year-ago period.
Inventory totaled $14.896 billion as of November 1, 2025.
Outlook
Target tightened its 2025 adjusted EPS outlook to $7.00–$8.00, down from $7.00–$9.00 and below the $7.36 consensus estimate.
The firm cut its 2025 GAAP EPS forecast to $7.70–$8.70 from $8.00–$10.00, compared with the $8.12 consensus estimate.
For the fourth quarter of 2025, the company said it is maintaining its expectation of a low-single-digit decline in sales.
“As we head into the all-important holiday season, our team is well-prepared and ready to serve our guests with the great products, value, and inspiration they expect from Target,” said Michael Fiddelke, incoming Chief Executive Officer of Target.
The company said it remains focused on strengthening merchandising authority, enhancing the shopping experience, and expanding its use of technology to operate with greater speed and consistency, all aimed at supporting a return to sustainable growth.
Price Action: TGT shares were trading lower by 2.91% to $85.89 premarket at last check Thursday.
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