Target Details Consumer Strain and Unveils Its Chatbot Plans

Target’s third-quarter 2025 earnings results suggest that consumers are under growing pressure, a dynamic that could shape holiday spending patterns across the retail sector.

While inventory is tight heading into the fourth quarter, management said shoppers remain cautious and selective, creating an uncertain backdrop for the most important shopping period of the year.

Net sales were 1.5% lower in the third quarter from a year ago, and comparable sales slipped 2.7%, according to a Wednesday (Nov. 19) press release. Comparable digital sales were up 2.4%.

During a conference call with analysts, executives described a consumer who is still buying but doing so with a sharper focus on needs and value.

“Guests are choiceful, stretching budgets and prioritizing value,” Target Chief Commercial Officer Rick Gomez said during the call.

Customers are concentrating their spending in categories like food, essentials and beauty, and they are seeking deals in discretionary categories, he said. Sentiment is at a three-year low due to concerns about jobs, affordability and tariffs.

The themes are consistent with prior quarters, showing a shopper who remains emotionally motivated to celebrate the holidays but is intent on not overspending, he said.

In his final earnings call, Target CEO Brian Cornell acknowledged the broader demand challenges. The company is focused on merchandising, experience and technology improvements designed to better anticipate what consumers want and deliver it more efficiently.

These priorities are essential to getting the company “back to sustainable growth,” he said during the call.

Target Chief Financial Officer Jim Lee reaffirmed guidance for a low-single-digit decline in comparable sales, consistent with year-to-date performance.

The company continues to see “a high degree of volatility” in weekly and monthly trends, including near-flat results in August and October but a notable pullback in September, he said during the call.

The holiday mix is expected to be shaped by spending categories that have already shown resilience. Food and beverage delivered another quarter of growth, with beverages up nearly 7%. Discretionary categories remain uneven. Apparel comps were down 5%. There was nearly 10% comp growth in toys and double-digit gains in video games, music and sporting equipment.

A key part of the company’s growth strategy is deeper use of artificial intelligence and its partnerships with major platforms, including OpenAI. Target Chief Operating Officer Michael Fiddelke, who will succeed Cornell in the CEO spot, said during the call that Target is “leading in the next wave of digital engagement” through an initiative called conversational curation. The program allows guests to describe what they want, and OpenAI systems will provide personalized recommendations.

Digital efforts extend beyond the OpenAI partnership. Target’s same-day services grew more than 35% in the quarter. Its generative AI-powered gift finder assists holiday shoppers with broad and specific queries. Management also pointed to machine learning tools improving inventory flow and in-stock performance.

Shares were down 0.6% in early trading Wednesday.

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