Investing.com -- Goldman Sachs downgraded Target Corp (NYSE: TGT ) to "Neutral" from "Buy," given concerns about a weaker recovery in discretionary categories, increased downside risk to earnings, and signs of slowing sales.

The brokerage said Target’s discretionary mix, about 53% of its 2024 product assortment, makes it more vulnerable to softer consumer spending, especially compared to peers like Costco (NASDAQ: COST ), Walmart (NYSE: WMT ), and BJ’s Wholesale, which have more grocery exposure.

“We are less likely to see a recovery in growth for discretionary categories in the near term,” Goldman said, pointing to tariff uncertainty, inflation pressures, and recent consumer data from HundredX and Placer showing negative trends.

Target reported a small sales decline in February, attributing it to cold weather and weakened consumer confidence. Placer data showed visits per location for Target fell 5.4% in April to date, trailing its peers.

Goldman also flagged risks from potential markdowns and tariff impacts. Even with some tariff exemptions on electronics, Target could face margin pressure unless it cuts SG&A costs or raises prices, the firm said.

Target shares have risen 6.5% since being added to Goldman’s Buy list in July 2019, compared to an 80% gain for the S&P 500 over the same period.

“While consumers may continue to shop around seasonal events, a decline in overall discretionary spending will continue to weigh on TGT’s top line for the near term, with signs of a sales decline,” analysts at Goldman Sachs said.