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Target on Wednesday reported earnings and revenue far below expectations, and cut its full-year forecast as inflation-battered customers fled to rivals like Walmart for low-priced essentials — sending shares plummeting more than 20%.
The Minneapolis-based company reported a 20% earnings miss, posting earnings per share of $1.85, below expectations of $2.30. It was Target’s largest miss in two years.
The disappointing results are in stark contrast to the world’s no. 1 retailer Walmart, which raised its annual sales and profit forecast for the third consecutive time a day earlier, as it took market share in groceries and merchandise.
“Consumers tell us their budgets remain stretched and they’re shopping carefully.” Target CEO Brian Cornell said on a post-earnings call.
“They are becoming increasingly resourceful in their shopping behaviors.”
The big-box retailer — which operates nearly 2,000 US stores — has cut prices on thousands of essential and gift items ahead of the holiday season.
It is also offering discounts on food, beverages and toys, while expanding its private-label brand, dealworthy, to include items such as smartphone chargers and toiletries.
Still, those efforts have so far failed to attract shoppers to its stores as customers were willing to wait for deals and hunted multiple retailers to find them.
Meanwhile, Walmart on Tuesday said it saw share gains across income cohorts mainly led by households which make more than $100,000 a year.
“With Walmart’s market share gains coming largely from higher income consumers, Target seems to be the one most at risk of losing additional share,” said Citi analyst Paul Lejuez.
Target stock was down 22% in mid-day trading Wednesday, putting it on track for one of its worst day’s on record.
The company reported its first revenue miss since August 2023, posting $25.67 billion, below expectations of $25.90 billion.
The big-box retailer slashed its full-year outlook and now expects adjusted earnings per share between $8.30 to $8.90 – just three months after it hiked its forecast between $9 to $9.70 a share. It now expects same-store sales in the fourth quarter to remain flat.
Target said its earnings were hit by hesitancy from cash-strapped consumers and a costly rush on shipments in anticipation of lengthy East Coast port strikes, which ended up lasting just a few days.
“It’s disappointing that a deceleration in discretionary demand combined with some cost pressures have caused us to take our guidance back down after raising it last quarter,” Chief Operating Officer Michael Fiddelke said during the post-earnings call, as reported by CNBC.
Same-store sales rose 0.3%, below expectations of a 1.5% gain, according to StreetAccount analysts.
Net income fell 12% to $854 million, or $1.85 per share, from $971 million, or $2.10 per share, in the same period last year.
“We encountered some unique challenges and cost pressures that impacted our bottom-line performance,” Cornell said.
Overall, shopper visits rose 2.4% in the three months ended Nov. 2, lower than 3% traffic growth in the prior quarter. Store-originated comparable sales dropped 1.9%, partly offset by a 10.8% jump in digital sales.
Target posted a comparable sales increase of 0.3%, well below analysts’ average estimate of 1.4%, according to data compiled by LSEG.
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