Target (TGT) customers may continue to hold off on purchases, adding to the retailer’s challenges.

In a statement Tuesday, the company said it expects a “meaningful” decline in first-quarter profits compared to the same period last year. The cautious outlook stems from “ongoing consumer uncertainty,” weaker sales in February, and mounting concerns over the impact of tariffs. President Donald Trump’s new tariffs on imported goods from Canada, Mexico, and China — which together accounted for almost 42% of total imports in 2024 — went into effect early Tuesday.

Target still beat Wall Street’s earnings expectations in its earnings report Tuesday. For the fourth quarter, the company reported revenue of $30.92 billion, about $2.41 earnings per share. The Street had forecast it would generate $30.82 billion, approximately $2.26 earnings per share, according to FactSet (FDS).

But with Trump’s tariffs threatening imports from Mexico, Canada, and China, Target could face additional challenges as consumers grow more hesitant. As of Tuesday, imports from Mexico and Canada face a 25% tariff hike, while products from China will face up to a 10% increase. The increases could drive prices up for consumers, further intensifying pressure on the retail sector. Walmart (WMT) has also warned it will likely raise prices, ultimately passing the costs onto consumers.

Target’s latest earnings come at a time when the company is scaling back its Diversity, Equity, and Inclusion (DEI) initiatives. Placer.ai, which tracks retail foot traffic, reported a significant drop in visits to Target stores across the U.S. following the shift. Placer.ai noted that the decline in foot traffic could be attributed to various factors, including weather, economic conditions, and other external influences.

Compounding Target’s difficulties, the retailer was sued by shareholders in early February, who accused the company of defrauding investors by concealing the risks associated with its DEI initiatives. Later that month, the state of Florida filed a separate lawsuit, alleging Target failed to disclose the financial risks linked to its DEI efforts.

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