According to Target's chief executive, Americans can expect to pay higher prices in the coming days for agricultural products such as strawberries, bananas and avocados imported from Mexico as Trump's tariffs.
The Minneapolis-based retailer warned that new tariffs and economic uncertainty will put pressure on first-quarter profits as consumers continue to take over their spending.
Target CEO Brian Cornell has raised concerns about the impact of rising duties, particularly on key grocery items, warning that the year will be difficult for retailers.
Prices for seasonal produce such as avocados could rise in the coming days as the company relies on Mexico “for a substantial supply.” Cornell told CNBC.
Cornell said Target has relied heavily on Mexican produce for the winter, and tariffs will allow for increased prices for fruit and vegetables this week.
“These are categories that try to protect pricing, but consumers are likely to see prices rise in the coming days,” he told CNBC in an interview after Target announced its fourth-quarter revenue.
“If there is a 25% tariff, those prices will rise,” Cornell added.
The retail giant's outlook comes as new 25% tariffs on imports from Mexico and Canada came into effect Tuesday, doubling the duties of Chinese products to 20%.
Target's warning coincides with those of retailer Walmart's fellow, which also expresses concerns about the chilling effects of tariffs on sustained inflation and consumer demand.
Non-essential categories such as home furniture and electronics, including more than two-thirds of Target's sales, have already seen weak demand. This is a trend that will get worse in the coming months.
Despite these challenges, Target's stock price rose by around 1% in pre-market trading after recording stronger holiday quarterly revenue than expected.
The retail chain reported a 1.5% increase in comparable sales for the quarter ending February 1, with analyst estimates rising 1.3%.
Earnings per share fell 19.3% to $2.41, but Wall Street's forecast was above $2.27.
Data compiled by LSEG shows that sales that can be compared to target projects will remain flat for the entire year until January 2026.
Our revenue forecasts of $8.80 to $9.80 per share were primarily in line with estimates.
Cornell emphasized that retailer's annual forecasts still do not explain the full impact of tariffs as much of the economic uncertainty continues to unfold.
However, he admitted that sales in February were already feeling the impact of “noise surrounding taxation.”
“We will continue to monitor these trends and be appropriately cautious about expectations for the upcoming fiscal year,” Target's Chief Financial Officer Jim Lee said in a statement.
Retailers also pointed to changes in consumer behavior that played a role in shaping financial results.
According to Placer.ai, the Target Store stairs fell 6.1% from late January to late February.
The company did not attribute the decline to a single factor, but some industry analysts suggest that a backlash from the retailer's decision to end the January Diversity and Inclusion (DEI) initiative could play a role.
Target did not comment on the issue in the revenue call.
Certain categories were strongly executed during the holiday quarter, including beauty, apparel, toys and sports goods.
However, home decoration and furniture sales are negative and reflect consumers' reluctance to spend on discretionary items.
The company also noted that increasing box shipments from one to two days increased digital comparable sales by 8.7%, increasing performance costs.
