Target Corporation’s stock plummeted 21% on Tuesday following the release of disappointing third-quarter earnings that fell short of Wall Street expectations. The retailer also revised its full-year profit forecast downward, marking its largest earnings miss in two years.
In its latest financial report, Target announced earnings of $1.85 per share, significantly lower than the anticipated $2.30. Revenue for the quarter reached $25.67 billion, just shy of the expected $25.90 billion. The company now projects adjusted earnings per share for the full year to be between $8.30 and $8.90, a decrease from its earlier forecast of $9.00 to $9.70 provided just three months ago.
Target’s expectations for fourth-quarter comparable sales have also been tempered, with the company forecasting them to remain approximately flat. This metric, which includes sales from stores open for at least 13 months and online, reflects a challenging retail environment.
The disappointing results led to a 21% drop in Target’s shares, which closed at $121.72, marking a 52-week low and reducing the company’s market value to $56.07 billion. This decline is compounded by the fact that the company missed earnings per share estimates by 20%, representing its first revenue miss since August 2023.
During a conference call, CEO Brian Cornell cited “lingering softness in discretionary categories” and increased costs related to expedited shipments in preparation for a brief port strike as factors impacting the company’s performance. Chief Operating Officer Michael Fiddelke expressed disappointment over the combination of declining discretionary demand and cost pressures, but maintained confidence in Target’s long-term outlook.
For the three-month period ending November 2, Target’s results compared unfavorably to analyst expectations:
- Earnings per share: $1.85 vs. $2.30 expected
- Revenue: $25.67 billion vs. $25.90 billion expected
Known for its stylish yet affordable merchandise, Target has struggled to maintain foot traffic and boost sales as consumers remain cautious in their spending following years of rising prices for essentials. To attract budget-conscious shoppers, Target announced price cuts on approximately 5,000 frequently purchased items earlier this year and implemented further reductions on over 2,000 items in October, including popular holiday products.
Despite these efforts, Target’s sales performance in the fiscal third quarter was lackluster. The company reported a mere 0.3% increase in comparable sales, falling short of the 1.5% growth anticipated by analysts. While customer traffic across its stores and online platforms increased by 2.4%, in-store sales declined by 1.9%, highlighting a shift in consumer behavior towards online shopping.
Target’s net income for the quarter dropped about 12% to $854 million, or $1.85 per share, compared to $971 million, or $2.10 per share, in the same quarter last year. Digital sales, however, were a bright spot, growing 10.8% year over year, driven by increased curbside pickup and same-day delivery services.
The retailer’s performance sharply contrasts with Walmart’s recent success, as Walmart reported improved sales in discretionary merchandise and an increase in market share among higher-income households. Walmart’s grocery sales make up roughly 60% of its U.S. business, compared to only 23% for Target, highlighting the differing sales strategies of the two retailers.
Rick Gomez, Chief Commercial Officer of Target, noted that consumers have become more strategic in their shopping habits, often waiting for the best deals before making purchases. He pointed out that the week leading up to Target’s Circle Week promotional event was relatively quiet, but ultimately became the most successful Circle Week to date, with 3 million new members joining Target’s loyalty program.
As the company navigates challenges such as higher supply chain costs and shifting consumer preferences, Target remains focused on offering compelling products and maintaining customer engagement. However, the retailer’s stock performance has lagged behind the S&P 500, with Target’s shares up only 9.5% this year compared to the S&P 500’s 24% gain during the same period. The company’s share price of around $155 is also significantly lower than its pandemic peak of nearly $270.
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