Target shares plunge after lackluster sales ahead of holiday season
Target lowered its full-year guidance
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Target shares tumbled on Wednesday after the retailer severely missed Wall Street's quarterly earnings estimates and cut its full-year profit guidance.
The retailer's stock fell 19% during morning trading after it said it's taking a more cautious stance for the most critical quarter in the retail industry after seeing weakness in certain discretionary categories, despite slashing prices on 2,000 items this holiday season to drive traffic. Shares are on pace for the worst day since May 2022, as tracked by Dow Jones Market Data Group.
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Target CEO Brian Cornell said the company "encountered some unique challenges and cost pressures" that impacted its bottom-line performance over the last three-month period.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| TGT | TARGET CORP. | 130.11 | +3.57 | +2.82% |
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Among its challenges, Cornell told analysts there was "continued softness" in certain discretionary categories "as consumers continue to spend cautiously."
The big-box retailer is now expecting store sales to be "approximately flat" during the fourth quarter. It is also projecting that its full-year adjusted earnings per share will range from $8.30 to $8.90.
A customer pushes a shopping cart outside a Target in Hyattsville, Maryland, on Nov. 10, 2022. (Sarah Silbiger/Bloomberg via / Getty Images)
It's an about-face from August when the company raised its full-year adjusted earnings per share to range between $9.00 to $9.70. Over the summer, the company benefited from price cuts it made, with Cornell saying there was an "acceleration" in unit and dollar sales trends during the three-month period ending June 30.
Target's adjusted earnings per share for the third quarter was $1.85, down 20% from Wall Street's estimate of $2.30. Its revenue notched $25.67 billion, missing analyst expectations of about $25.90 billion.
The Target logo is seen on a truck outside a store in Hyattsville, Maryland, on Nov. 10, 2022. (Sarah Silbiger/Bloomberg via / Getty Images)
"It's disappointing that a deceleration in discretionary demand, combined with multiple cost pressures, have caused us to take down our guidance after raising it last quarter," Chief Operating Officer Michael Fiddelke said during the company's earnings call Wednesday.
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Fiddelke said that given the consumer uncertainty, the company believes "it's prudent to take this conservative approach while taking swift and disciplined action to position ourselves to win during the holidays."
Target
He said the company still remains "confident in the long term trajectory of our business" and said it is "confident that demand in discretionary categories will normalize."
The stock has lost over 13% this year, while rival Walmart shares have gained over 60%.