Inside today’s Daily Journal…

Target (TGT) offers a profound lesson, happening in real time, for every business owner or investor.

When your unique selling proposition (“USP”) no longer exists, then you must pivot. All too often, boards (and private business owners) only see the risks to changing course. They ignore the certainty of failure without change.

Great example: Kodak versus Fujifilm.

Eastman Kodak (KODK) tried to protect its core chemical film business because it was a cash cow. Its board didn’t seem to notice that technology (digital cameras) meant there was zero future in consumer chemical film. Its big innovation to compete with digital? Film cameras in a disposable cardboard box, with plastic lenses and zero quality. Kodak when bankrupt.

Fujifilm’s (FJI) board stopped investing in legacy film cameras immediately. Instead, it invested in building new applications for its core chemical expertise, including an array of high-tech semiconductor manufacturing materials and medical systems, like endoscopes and diagnostics. To deal with consumer digital competition, it offered what digital cameras don’t: a printed photo, instantly. Fujifilm’s Instax camera line (introduced in 1998) has become the dominant leader in the instant photography market, with over 100 million units sold.

Target built its business around a clear market niche: it offered higher-quality merchandise and a much higher-quality shopping experience to middle-income women. And it did such a good job with the retail experience that it became a weekend destination for millions of American families. It wasn’t like shopping with the “people of Walmart” (see the Instagram page of the same name), and it wasn’t a huge warehouse with merchandise piled to the rafters, like Costco.

The problem is that Target’s USP no longer works, for a variety of reasons, including poor execution. But even perfect execution can’t beat DoorDash, Instacart, and Amazon. The way housewives shop has changed forever with the advent of cheap, same-day delivery. These services have siphoned-off Target’s best customers, marking Target as the next victim in the death of retail.

The numbers speak for themselves.

Total sales fell 1.7% to $104.8 billion in 2025 from the year before. Target has now seen negative or flat growth in 11 of the last 13 quarters. This isn’t a “rough patch” – it’s a USP that’s obsolete and a business model that’s broken.

In an inflationary environment, flat nominal sales represent a massive decline. To re-ignite growth, Target has followed the traditional retail playbook, lowering prices to drive sales. That means it must compete directly on price with Walmart (WMT) and Costco Wholesale (COST) – fights it can’t win. The strategy is killing the company’s margins and profits. Last year’s operating income was down 43% from its peak in 2021.

And the numbers are actually far worse than these declines suggest. To cover massive declines in retail profits, management is increasingly relying on Roundel (selling advertising so other businesses can target its customers) and Target Circle 360 (memberships). This high-margin advertising and membership revenue is being used to plug the hole left by the failing retail business. While Roundel and Target Circle are great businesses, they only work if people are actually shopping at Target. If the underlying retail traffic continues to decline, the value of these product lines will fall to zero.

Thus, the real problem isn’t prices or merchandising – it’s traffic.