Target’s sales and profit miss expectations amid stiff competition

Target posted its biggest earnings miss in two years and lowered its forecast. The news sent its shares to tumble almost 22% by midday Wednesday.

In its latest quarter, the company reported its profit shrank 12% to $854 million. Comparable sales grew just 0.2%, falling short of Wall Street expectations. Same-store sales dipped 1.9% in the third quarter, with total revenue rising just 1.1% to $25.7 billion.

What went wrong?
Shoppers are not making big purchases like appliances or spending on non-essential items, which is almost half of Target’s business.

The retailer also faced increased supply chain costs due to early inventory preparation, further impacting profits.

Target lowered its holiday-quarter forecast, expecting flat sales and profits between $1.85 and $2.45 per share, below analysts’ expectations. It anticipates a tough season, citing continued pressure on consumer budgets, and reduced its annual earnings forecast by 8%.

Despite heavy discounts on essentials, toys and its private-label brand Dealworthy, Target struggled to attract shoppers looking for budget-friendly options.

Comparable sales grew just 0.2%, falling short of Wall Street expectations.

The retailer also faced increased supply chain costs due to early inventory preparation, further impacting profits.

In response, Target slashed prices on over 10,000 items, focusing on essentials like groceries and household staples. 

But
Analysts criticize the retailer’s lack of innovative product offerings, warning this could hinder recovery during the critical holiday shopping season.

Meanwhile, its rival Walmart’s competitive pricing and broader grocery selection continue to attract cost-conscious shoppers. Households earning over $100,000 accounted for ~75% of its Q3 market share growth, signaling a shift in consumer behavior.