Target Misses Earnings Expectations Amid Lower Foot Traffic and Increased Costs

On Wednesday, Target Corporation reported financial results that fell short of Wall Street‘s quarterly earnings and revenue expectations. The retail giant observed only a slight increase in customer traffic, despite implementing price cuts on thousands of items and launching early holiday sales. This prompted the company to revise its full-year profit guidance downward, just three months after an earlier update.

In its latest forecast, Target now anticipates full-year adjusted earnings per share to range between $8.30 and $8.90, a reduction from previous guidance and below the $9.55 a share expected by analysts, as per StreetAccount. For the fourth quarter, the company expects comparable sales, which include revenue from its website and long-standing stores, to remain relatively flat.

The Minneapolis-based retailer’s shares saw a 20% plunge in premarket trading following the announcement. CEO Brian Cornell attributed the lackluster performance to «lingering softness in discretionary categories» and the additional expenses involved in expediting shipments in preparation for a brief strike situation.

Chief Operating Officer Michael Fiddelke commented on the results, describing them as disappointing given the slowdown in discretionary demand and rising costs. However, he expressed confidence in Target’s long-term strategy and performance prospects.

During the fiscal quarter ending November 2, Target’s comparable sales experienced a modest gain of 0.3%, falling short of the 1.5% analyst expectations. The company saw an approximately 12% decline in net income, culminating at $854 million, or $1.85 per share, down from $971 million, or $2.10 per share, a year earlier.

Target’s customer traffic grew by 2.4% across its stores and online platforms, with digital sales emerging as a bright spot due to significant growth in curbside pickups and same-day home deliveries. In contrast, sales at brick-and-mortar stores declined by 1.9% year over year.

In May, Target had announced a series of price reductions on everyday items such as diapers, bread, and milk in a bid to attract price-sensitive consumers. Further discounts were introduced in October across more than 2,000 items, including cold medicines and toys, as part of its holiday season strategy. By the end of the year, Target aims to have reduced prices on over 10,000 items.

Brian Cornell acknowledged the competitive landscape, noting that consumers are becoming increasingly resourceful, often waiting for favorable prices before making purchases. Highlighting Target’s competitive edge, Chief Commercial Officer Rick Gomez remarked, «Consumers know deals are out there. They’re willing to search for them, and they’ll wait for the exact right moment to head into our stores or log on to our app.»

Furthermore, Target encountered challenges related to escalating supply-chain costs. Ahead of potential port disruptions, the company rushed shipments and increased inventory, actions that Fiddelke noted were necessary to maintain a positive customer experience, albeit at higher costs.

Despite these challenges, the company reported significant success during its promotional events such as Circle Week, which resulted in a record number of sign-ups for its loyalty program.

While Target attempts to navigate a challenging retail environment, its stock has underperformed relative to the S&P 500, gaining about 9.5% this year compared to the broader index’s 24% increase. The company’s stock price remains significantly lower than its pandemic-era highs of nearly $270.