Target on Wednesday reported much lower-than-expected profits and sales and cut its full-year forecast, sending its stock price down more than 20% as inflation-stricken customers fled to rivals such as Walmart for lower-priced essentials. It plummeted.
The Minneapolis-based company reported a 20% loss in earnings, with earnings of $1.85 per share, below expectations of $2.30. It was Target's biggest failure in the past two years.
The disappointing results are in stark contrast to the results of the world No. 1. No. 1 retailer Walmart raised its full-year sales and profit forecasts for the third consecutive time a day earlier as it gained market share in groceries and merchandise.
“Consumers are telling us their budgets are still tight and they're shopping cautiously,” Target CEO Brian Cornell said on a post-earnings conference call.
“They are becoming increasingly resourceful in their shopping behavior.”
The major retailer, which operates about 2,000 stores in the United States, has slashed prices on thousands of essential items and gifts ahead of the holiday season.
It also offers discounts on food, beverages and toys, while expanding its private label brand 'dealworthy' to include items such as smartphone chargers and amenities.
Still, these efforts have so far failed to draw shoppers into stores, as customers are eagerly awaiting sales and scouring multiple retailers to find them.
Meanwhile, Walmart announced Tuesday that its share is increasing across income groups, primarily among households with annual incomes of $100,000 or more.
“Walmart's market share gains have been driven primarily by higher-income consumers, and Target appears to be the company most at risk of losing further market share,” said Citi analyst Paul LeJuet.
Target stock fell 22% in intraday trading on Wednesday, on track for its worst day ever.
The company reported lower sales for the first time since August 2023, with sales of $25.67 billion, below expectations of $25.9 billion.
The retail giant lowered its full-year outlook and now expects adjusted earnings per share to range from $8.30 to $8.90. This comes just three months after raising expectations from $9 to $9.70 per share. The company currently expects same-store sales to be flat in the fourth quarter.
Target said its results were hurt by hesitancy by cash-strapped consumers and a rush to ship expensive shipments in anticipation of a prolonged port strike on the East Coast, which ended up lasting just a few days.
“A slowdown in discretionary demand, combined with some cost pressures, led us to lower our guidance after raising it last quarter,” Chief Operating Officer Michael Fidelke said in a post-earnings conference call. It's a shame,” he said. CNBC reported.
Same-store sales rose 0.3%, lower than expectations for a 1.5% increase, according to Street Account analysts.
Net income was $854 million, or $1.85 per share, down 12% from $971 million, or $2.10 per share, in the year-ago period.
“We faced several unique challenges and cost pressures that impacted our bottom line results,” Cornell said.
Overall, shopper visits rose 2.4% in the three months to Nov. 2, lower than last quarter's 3% traffic growth. Comparable sales in physical stores decreased 1.9%, partially offset by a 10.8% increase in digital sales.
Target's sales rose 0.3%, well below the average analyst estimate of 1.4%, according to data compiled by LSEG.
