TGT will report FQ1 2025 results on May 22. Sales will likely remain pressured (we forecast -3.3% comp sales) before returning to low-single-digit growth in FQ2 2025, as comps will get much easier due to the lapping of the prior year’s Pride merchandise backlash. While sales upside will likely be limited by continued discretionary spending weakness, we are positive on TGT’s recent efforts to refresh merchandise and introduce more value, including new private label brands (e.g., Dealworthy, Figmint). TGT’s new membership program (Target Circle 360), which was launched on April 7, provides a new revenue stream and should drive incremental wallet share by leveraging Target Circle’s over 100M members. We see gross margin expansion from favorable freight, lower markdowns (inventory was -12% Y/Y in FQ4), and stabilizing shrink, but operating margin expansion will likely be limited due to sales deleveraging and higher wages. It is unlikely that TGT will return to its pre-pandemic 6% operating margin this fiscal year.