How tariffs could impact Target in 2025
Target. (FOX 9)
MINNEAPOLIS (FOX 9) - Target says there will be "meaningful year-over-year profit pressure" in 2025 because of tariffs and other costs.
Impact of tariffs on Target
What they're saying:
Target, in its fourth quarter earnings report released on Tuesday, said it beat expectations for its fourth-quarter profits but revenue did fall to $30.91 billion, from $31.9 billion. The company says its total comparable sales increased 1.5% in the fourth quarter, with store sales declining 0.5% and digital sales increasing 8.7%.
The earnings report comes amid retailer uncertainty as Americans limit their spending, especially on discretionary items that Target is known for, such as clothing and electronics, The Associated Press notes.
Looking ahead, Target said in its report, "In light of ongoing consumer uncertainty and a small decline in February net sales, combined with tariff uncertainty and the expected timing of certain costs within the fiscal year, the company expects to see meaningful year-over-year profit pressure in its first quarter relative to the remainder of the year."
However, Target expects to see net sales growth of around 1% this year, a modest increase in their operating margin rate, and an effective tax rate of 23 to 24%.
"During February, we saw record performance around Valentines Day. However, our topline performance for the month was soft, as uncharacteristically cold weather across the U.S. affected apparel sales, and declining consumer confidence impacted our discretionary assortment overall," said Jim Lee, chief financial officer. "Looking ahead, we expect to see a moderation in this trend as apparel sales respond to warmer weather around the country, and consumers turn to Target for upcoming seasonal moments such as the Easter holiday. We will continue to monitor these trends and will remain appropriately cautious with our expectations for the year ahead."
Trump's tariffs go into effect: What you need to know
Big picture view:
President Donald Trump has been threatening tariffs against Canada and Mexico, and they go into effect on Tuesday. The U.S. will impose 25% tariffs on imports from both countries, except it will tax Canadian energy products at a 10% rate.
The move escalates trade tensions with the U.S.’s three largest trading partners. China, in response, announced Tuesday it would 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. companies. Meanwhile, both Canada and Mexico have promised countermeasures in response to the tariffs.
Trump has framed the tariffs as an effort to curb illegal immigration and drug trafficking, particularly fentanyl, while also aiming to rebalance trade and bring more manufacturing back to the U.S. However, the decision has sparked renewed concerns over rising inflation and disruptions to supply chains.
The United States conducted $2.2 trillion in trade with Mexico, Canada, and China last year, and businesses fear that the new tariffs will push up costs for American consumers while triggering countermeasures that could further disrupt global markets.
The tariffs are expected to have an impact on the auto industry, and could lead to higher prices at the pump, in grocery stores and on tech.
- Energy: Canada is the U.S.'s largest foreign supplier of crude oil, shipping $98 billion worth of crude to the U.S. last year. With oil and natural gas now subject to a 10% tariff, gas prices in the Midwest and Northeast could rise.
- Food: Mexico supplies nearly half of U.S. imported vegetables and 40% of fruits, including 90% of avocados. Grocery prices could climb further, adding to consumer frustration over inflation.
- Technology & retail: China remains a top source for cell phones, computers, and electronics. The increased tariffs on Chinese imports could drive up costs on these everyday items.