Target CEO warns of price hikes on produce in coming days following Mexico tariffs

Americans can President Trump’s tariffs go into effect on Tuesday, according to Target’s chief executive officer.

The Minneapolis-based retailer warned that new tariffs and economic uncertainty would pressure its first-quarter profits, as consumers continue to pull back on spending.

Target CEO Brian Cornell expressed concerns about the impact of rising duties, particularly on key grocery items, and cautioned that the year ahead would be challenging for the retailer.

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Prices could increase over the next couple of days for seasonal produce such as avocados as the company depended on Mexico “for a significant amount of supply” for those categories, Cornell told CNBC.

Cornell said Target relies heavily on Mexican produce during the winter months, and the tariffs could force the company to raise prices on fruits and vegetables as soon as this week.

“Those are categories where we’ll try to protect pricing, but the consumer will likely see price increases over the next couple of days,” he told CNBC in an interview after Target released its fourth-quarter earnings.

“If there’s a 25% tariff, those prices will go up,” Cornell added.

The retail giant’s outlook came as new 25% tariffs on imports from Mexico and Canada took effect on Tuesday, alongside a doubling of duties on Chinese goods to 20%.

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Target’s warning aligns with that of fellow retail leader Walmart, which has also voiced concerns about persistent inflation and the chilling effect of tariffs on consumer demand.

Non-essential categories such as home furnishings and electronics — comprising more than two-thirds of Target’s sales — have already seen weakened demand, a trend that could worsen in the coming months.

Despite these challenges, Target’s stock rose about 1% in premarket trading after it posted stronger-than-expected holiday quarter earnings.

The retail chain reported a 1.5% rise in comparable sales for the quarter ending Feb. 1, surpassing analyst estimates of a 1.3% increase.

Earnings per share fell 19.3% to $2.41, though they still exceeded Wall Street expectations of $2.27.

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For the full year through January 2026, Target projects comparable sales to be flat — falling short of analysts’ average expectation of 1.86% growth, according to data compiled by LSEG.

The company’s earnings forecast of $8.80 to $9.80 per share was largely in line with estimates.

Cornell emphasized that the retailer’s annual forecast does not yet account for the full impact of the tariffs, as much of the economic uncertainty continues to unfold.

However, he acknowledged that sales in February had already felt some impact from the “noise surrounding the levies.”

“We will continue to monitor these trends and will remain appropriately cautious with our expectations for the year ahead,” Target chief financial officer Jim Lee said in a statement.

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The retailer also pointed to shifts in consumer behavior that have played a role in shaping its financial results.

Foot traffic at Target stores dropped 6.1% from late January through late February, according to Placer.ai.

While the company did not attribute the decline to any single factor, some industry analysts have suggested that backlash from the retailer’s decision to end its diversity, equity and inclusion (DEI) initiatives in January may have played a role.

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Target did not comment on this issue in its earnings call.

Certain categories performed strongly during the holiday quarter, including beauty, apparel, toys, and sporting goods.

However, home decor and furnishing sales were negative, reflecting consumers’ reluctance to spend on discretionary items.

The company also noted an 8.7% increase in digital comparable sales, driven by a rise in one- to two-day box shipments, which increased fulfillment costs.