Toms Capital’s Target Play: Can Strategy and Cost Control Rescue the Retailer?

Toms Capital’s entry into Target’s shareholder base comes at a moment of sustained underperformance. Target has endured multiple consecutive quarters of flat or negative comparable sales growth, driven by weakening store traffic and a pullback in discretionary purchases. Toms Capital, which has agitated for strategic change at peers including Kenvue and US Steel, likely views Target as similarly capable of operational improvement if strategic underperformance is addressed. [1][2]

Financial data confirms the gravity of the situation: in Q3 fiscal 2025 (ending November 2025), total net sales fell ~1.5% year-over-year to $25.3B; comparable sales dropped ~2.7%. Merchandise revenue was declining, partially offset by strength in non-merchandise streams such as advertising and membership. Net income and GAAP/adjusted EPS were down significantly. [3][6]

Target’s response strategy combines leadership renewal, investment, and cost discipline. The planned handover of the CEO role to COO Michael Fiddelke in February 2026 brings in continuity but also opportunity for change. The company plans ~$5B in capital expenditure in 2026 to enhance stores, remodel, and upgrade its digital and fulfillment capabilities. Corporate headcount reductions (approx. 1,800 positions) aim to reduce overhead. [1][5]

Key risks to executing this turnaround include margin compression from markdowns, particularly given pressure from tariffs and input cost inflation; the lag in customer re-acquisition after lost discretionary spending; and whether investments (stores, digital, technology) can deliver return before further erosion. Additionally, the lack of public disclosure about TCIM’s demands or stake size adds uncertainty: will they push for asset spin-offs, real estate deconsolidation, board seats, or other structural changes?

Strategic implications for investors and management: Target may need to sharpen its value proposition vs rivals like Walmart and Amazon; prioritize essentials and high-ROI categories; possibly divest underperforming assets; and improve supply chain flexibility. For TCIM, playing a constructive activist role could unlock value—but with execution risk high, the window for turning sentiment and results is narrow.