MW Why Target's price cuts on thousands of items are more than just a sales gimmick

By Tomi Kilgore

Coupled with the company's recent layoff announcement, the price cuts reflect a decisive move by the incoming CEO to change the status quo

Coupled with Target's recent layoff announcement, the price cuts reflect a decisive move by its incoming CEO to change the status quo

Price cuts can be a retailer's way of going on the offensive against its rivals - but for Target Corp., it's more of a defensive play, and reflects the struggling company's need to make a change.

Target (TGT) said Tuesday that it is lowering prices on 3,000 food, beverage and other essential household items. The announcement comes about a week before the discount retailer releases third-quarter results, with the company expected to report comparable sales - which are sales of stores open for at least 13 months - that declined from a year prior for the third straight quarter. In comparison, chief rival Walmart Inc.'s $(WMT)$ comparable sales have increased every quarter for at least five years, based on available FactSet data.

On Target's second-quarter earnings call with analysts, there seemed to be more talk about the company trying not to raise prices to cover continuing inflation and tariff pressures, so that it can stay competitive.

So while Tuesday's announcement may at first seem like a conventional move ahead of the holidays, it's actually a lot more than that. Jefferies analyst Corey Tarlowe said the price cuts are "a necessary and timely response to competitive and macro pressures" that have prompted consumers, especially those from lower-income households, to be more price sensitive and spend more on needs over wants. He believes the new pricing actions will help Target regain competitive footing.

"We believe [Target's] price reductions are strategically positioned to close the value gap with mass and club retailers, notably Walmart and BJ's, who have maintained strong traffic and comp sales through consistent price investment," Tarlowe wrote in a note to clients.

Target's stock gained 0.9% to close Tuesday at $91.58. It has dropped 32.3% in 2025, while Walmart shares have advanced 14.5% and BJ's Wholesale Club Holdings Inc.'s stock $(BJ)$ has gained 4.5%.

Target has trailed its rivals in the current environment in part because only 23% of its sales in the second quarter were from the food-and-beverage category and another 18% were from household essentials, while the rest were in more discretionary categories. In other words, less than half what Target sold were needs.

Meanwhile, 59% of Walmart's sales were tagged as grocery, and 71% of BJ's sales were listed as perishables, groceries and sundries.

Read: Target is getting crushed by Walmart. Here are the reasons why.

When it was announced in August that current Chief Operating Officer Michael Fiddelke would take over for Brian Cornell as Target's chief executive in February, some said the pick lacked "pop" and showed the company didn't want to make too many changes.

But combined with job cuts announced in late October, Jefferies's Tarlowe said the moves signal that Fiddelke is willing to act decisively to turn things around, and that they should ease fears about a "status quo approach."

What's more, Tarlowe said he believes lower costs for Target as a result of the layoffs could offset the negative impact that lower prices would have on profitability.

"In our view, the combination of pricing actions and structural cost resets under new leadership lays the foundation for a more durable turnaround," he wrote.

-Tomi Kilgore

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November 11, 2025 17:27 ET (22:27 GMT)

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