In a candid and critical message to investors, Target CEO Brian Cornell has raised serious concerns about the possibility of price hikes, calling them a “very last resort” as the retail giant grapples with rising operational costs. Speaking during the company’s first-quarter earnings call, Cornell detailed how ongoing global tariffs, especially those linked to the U.S.-China trade war, continue to drive up expenses. The company has managed to remain competitive thus far, but the threat of higher prices looms as it adjusts to new economic realities.
Despite these pressures, Target, one of America’s largest discount retailers, reported impressive annual sales of $105.8 billion for 2023. However, the company has faced a downturn in early 2025, with both sales and customer foot traffic declining significantly. This recent performance drop has prompted Target’s leadership to carefully consider its options moving forward.
Cornell emphasized that while price increases are on the table, they will only be implemented if absolutely necessary. “We are committed to supporting American families, and our focus is on keeping prices competitive,” he stated. “We’ve worked hard to provide affordability even in challenging times, and we will continue to strive for that.”
The comment comes at a time when U.S. consumers are feeling the pinch from rising costs across various sectors. Food, gas, and consumer goods are all more expensive than they were a year ago, largely due to inflation and the knock-on effects of international trade disruptions. For a retailer like Target, which prides itself on offering a wide range of affordable goods, the rising costs present a significant challenge in maintaining profit margins without alienating price-conscious customers.
Efforts to Mitigate Costs: Target’s Strategic Moves
During the earnings call, Target’s Chief Commercial Officer Rick Gomez outlined several initiatives the company is pursuing to minimize the impact of these rising operational costs. One of the key strategies involves renegotiating contracts with vendors, which could help mitigate some of the cost pressures caused by tariffs. Gomez also emphasized how Target is diversifying its sourcing to reduce reliance on Chinese manufacturing.
“We’ve made great strides in diversifying our supply chains over the past few years,” Gomez explained. “In 2017, nearly 60% of our products were sourced from China. By 2026, we expect that number to drop to just 25%. This will help us manage costs more effectively and reduce the impact of tariffs, which have become a major challenge for U.S. businesses.”
The shift away from China is a broader trend seen throughout the retail industry, with companies looking to countries such as Vietnam, India, and Mexico for manufacturing options. In particular, Target’s efforts to reduce its dependence on Chinese goods will likely shield it from some of the most significant tariff increases imposed during the U.S.-China trade war, although Gomez admitted that some product categories may still see price increases as a result.
Price Increases: Inevitable but Necessary?
Despite the ongoing efforts to minimize the impact of tariffs, Gomez acknowledged that some price increases may be unavoidable. “While we are doing everything we can to keep prices low, certain costs are simply out of our control. We are seeing price pressures from both raw materials and transportation, and those will likely be passed on to consumers in select categories,” he said.
Target’s recognition of this inevitability comes as other large retailers, including Walmart, have faced similar pressures. Walmart, the world’s largest retailer, also announced plans to raise prices on certain items due to rising global costs. The decision by both retailers to adopt a “last resort” approach to price hikes reflects the larger trend in the retail sector, where companies are working tirelessly to balance cost pressures with the need to maintain customer loyalty.
While many retailers are hesitant to raise prices amid fierce competition, analysts warn that doing so may be unavoidable in the current economic climate. According to retail industry expert Greg Melich of Evercore ISI, “The reality is that inflationary pressures are not going away, and the cost of doing business is only rising. Consumers will eventually have to bear the brunt of these rising costs.”
Target’s Expansion Plans Amid Economic Strain
In addition to its strategies to manage rising costs, Target remains focused on expansion, even in the face of economic uncertainty. The company announced plans to open 20 new stores in 2025, continuing its aggressive growth strategy. This marks a significant commitment to physical retail at a time when many other companies are scaling back or moving toward online-only models.
“We remain bullish on our store growth,” Cornell said. “Our team continues to find innovative ways to serve our customers, and we see opportunities in both urban and suburban markets. These new stores will help us reach even more families across the country.”
Target’s decision to move forward with physical store openings reflects its confidence in its ability to weather the current retail storm. The company’s emphasis on omnichannel shopping—offering both online and in-store experiences—has been a key factor in its resilience over the years. As consumers shift between shopping online and in physical stores, Target’s ability to offer a seamless experience across both platforms remains a critical component of its business strategy.
The Bigger Picture: A Competitive Retail Landscape
Target is not alone in its efforts to combat rising costs and shifting market dynamics. Walmart, which also faces similar challenges, has adopted many of the same strategies as its competitor, including renegotiating supplier contracts and exploring new sourcing options. However, Target has been able to differentiate itself through its strong emphasis on its private-label products and its more modern in-store experience, which has earned the company a loyal following.
Walmart, on the other hand, has relied heavily on its scale and aggressive pricing strategy to maintain its market leadership. As both companies navigate the challenges of rising costs, they are increasingly engaged in a battle not just for sales, but for consumer loyalty.
“We’re all facing similar headwinds, and it’s clear that no one is immune to the pressures of inflation and rising supply chain costs,” said Melich. “But how each retailer responds, and how effectively they communicate their pricing strategy to consumers, will determine who comes out ahead in the long run.”
Conclusion: A Fine Line Between Profit and Customer Loyalty
As Target and other major retailers face the challenge of rising operational costs, the future of consumer pricing remains uncertain. Target’s leaders are working hard to find solutions that will allow them to maintain competitiveness while also addressing cost pressures. However, with price increases on the horizon, the question remains: How will customers respond?
If recent trends are any indication, consumers may be willing to absorb higher prices for a limited time—especially if they continue to feel that the value they are getting from retailers like Target is worth the cost. As for the company’s future, Target’s emphasis on growth and strategic sourcing diversification will likely position it well to continue thriving in an ever-evolving retail landscape.
