Target Corporation (NYSE: TGT) has plummeted in premarket trading after the retailer reported disappointing third-quarter earnings and reduced its full-year guidance. Despite efforts to attract shoppers through price cuts and early holiday sales, the company missed Wall Street’s earnings and revenue expectations, leading to a sharp decline in stock price.
As of the time of writing, shares are down 18.38%.
For the quarter ending 2 November 2024, Target posted adjusted earnings per share (EPS) of US$1.85, significantly below analysts' forecast of US$2.30. Revenue of US$25.67bn also fell short of the US$25.90bn expected. The company's net income of US$854m marked a 12% decline from the previous year, as cost pressures and challenges in driving discretionary spending weighed on performance.
Target also slashed its full-year EPS forecast, now expecting a range of US$8.30 to US$8.90, down from the previous range of US$9.00 to US$9.70. This revision came just three months after the retailer had raised its expectations. The company also forecast a flat fourth-quarter comparable sales figure, signaling cautious consumer spending heading into the holiday season.
CEO Brian Cornell cited "lingering softness in discretionary categories" and supply chain issues, including higher costs from rushed shipments and preparations for a brief port strike, as factors contributing to the company’s poor performance. He expressed confidence in Target’s long-term outlook but acknowledged that the near-term environment remained challenging.
In an effort to appeal to price-conscious consumers, Target had previously slashed prices on thousands of popular items, including essentials like diapers, bread, and cold medicine. However, despite these efforts, the company reported only a modest 0.3% increase in comparable sales, falling short of analysts' expectations of a 1.5% gain.
The company's struggles are in stark contrast to rival Walmart, which reported a strong quarter, beating Wall Street's estimates and raising its outlook for the rest of the year.
Target’s digital sales did show a positive trend, rising 10.8% compared to the same period last year, as more shoppers turned to online shopping. However, in-store sales were down 1.9%, highlighting the ongoing shift in consumer behaviour.
