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Target (TGT -5%) is heading lower after reporting Q4 (Jan) results this morning. After a big EPS miss last quarter, Target bounced back with a nice EPS beat in Q4. Revenues fell 3.1% yr/yr to $30.91 bln, which was also better than expected. The FY26 EPS guidance was in-line, while revenue guidance was below expectations. In a bit of a worry, TGT usually guides for next quarter EPS and comps, but did not with this report. That was a bit concerning and hopefully not a long term policy change.

• Same store comps for Q4 came in at +1.5% (in-store -0.5%; digital +8.7%), right in-line with prior guidance of +1.5%. Comps reflected strong traffic and digital performance. Comp trends in Apparel and Hardlines accelerated by nearly four percentage points vs Q3. Results were led by strong performances in Beauty, Apparel, Entertainment, Sporting Goods and Toys.
• Unfortunately, we did not get comp guidance for Q1 (Apr), however, we did get some color. During February, Target saw record performance around Valentines Day. However, its topline performance for the month was soft as uncharacteristically cold weather across the US affected apparel sales. In addition, declining consumer confidence impacted its discretionary assortment overall. Target did guide for full year comps being about flat.
• Looking ahead, Target expects 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. Target plans to monitor these trends and remains appropriately cautious with expectations for the year ahead.
• We watch Target's operating margins closely. In Q4, that dropped to 4.7% from 5.8% in the prior year period. Margins were impacted by higher digital fulfillment and supply chain costs and higher promotional and clearance markdown rates. These pressures were partially offset by the net benefit of other merchandising activities.
• Target did not guide for Q1 operating margin, but it sounds like investors need to be prepared for a big margin decline. The company is seeing ongoing consumer uncertainty and it already posted a small decline in February sales. Also, tariff uncertainty and the expected timing of certain costs within the fiscal year leads Target to expect meaningful yr/yr profit pressure in Q1 relative to the remainder of the year.

As we said in our preview, our concern was not really about Q4 given that Target provided guidance late in the quarter. Given Walmart's (WMT) weak guidance, we were much more concerned about Target's Q1 and FY26 guidance. The FY26 guide was decent with flat comps. However, investors need to brace for a rough Q1 from both a comp and margin perspective. It was also a bit scary that TGT changed course and provided no guidance for the next quarter. Hopefully, that's not a long term change.