Target on Wednesday reported earnings and revenue well below expectations, and cut its full-year forecast as inflation-stricken customers fled to rivals like Walmart for lower-priced essentials — sending shares plunging more than 20%. There was a decline of more.
The Minneapolis-based company reported a 20% decline in earnings, reporting earnings per share of $1.85, missing expectations of $2.30. This was Target’s biggest mistake in two years.
The disappointing results are in stark contrast to world numbers. No. 1 retailer Walmart, which a day earlier raised its annual sales and profit estimates for the third consecutive time as it took market share in groceries and merchandise.
“Consumers tell us their budgets are stretched and they are shopping cautiously.” Target CEO Brian Cornell said on a post-earnings call.
“They are becoming increasingly resourceful in their purchasing behavior.”
The big-box retailer — which operates about 2,000 U.S. stores — has cut prices on thousands of essential and gift items ahead of the holiday season.
It’s also offering discounts on food, beverages and toys, while expanding its private-label brand, Dealworthy, to include items like smartphone chargers and toiletries.
Still, those efforts have so far failed to attract shoppers to its stores because customers were willing to wait for deals and search multiple retailers to find them.
Meanwhile, Walmart said Tuesday it has seen an increase in share in income groups primarily led by families who earn more than $100,000 a year.
“With Walmart’s market share gains largely coming from higher-income consumers, Target appears to be most at risk of losing additional share,” said Citi analyst Paul LeJuez.
Target stock fell 22% in mid-day trading Wednesday, making it one of its worst days on record.
The company reported a decline in revenue for the first time since August 2023 to $25.67 billion, below expectations of $25.90 billion.
The big-box retailer has lowered its full-year outlook and now expects adjusted earnings per share to be between $8.30 to $8.90 — just three months after it raised its forecast to between $9 to $9.70 per share . It now expects same-store sales to remain flat in the fourth quarter.
Target said its earnings were hit by hesitancy from cash-strapped consumers and a costly rush to ship in anticipation of longer lead times. attack on east coast portWhich lasted for a few days and ended.
“It is disappointing that the decline in discretionary demand coupled with some cost pressures has caused us to withdraw our guidance after raising it last quarter,” Chief Operating Officer Michael Fidelke said during a post-earnings call. Reported by CNBC,
Same-store sales rose 0.3%, less than expectations for 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 faced some unique challenges and cost pressures that impacted our bottom-line performance,” Cornell said.
Overall, the number of shoppers increased 2.4% in the three months ended Nov. 2, down from 3% traffic growth in the previous quarter. Store-generated comparable sales declined 1.9%, partially offset by a 10.8% increase in digital sales.
Target reported comparable sales growth of 0.3%, well below analysts’ average estimate of 1.4%, according to data compiled by LSEG.
