Target forecast holiday-quarter comparable sales and profit below estimates as value-conscious consumers shopped for low-priced essentials at rival retailers including Walmart.
The US retailer now expects flat comparable sales in the fourth quarter and profit in the range of $1.85 to $2.45 per share. Analysts on average had expected a 1.64% rise in sales and profit of $2.66 per share.
Target also trimmed its annual forecast for per-share earnings to between $8.30 and $8.90 from its prior range of between $9 and $9.70 after weaker-than-expected third-quarter results.
The results are in contrast to Walmart, which raised its annual sales and profit forecast for the third consecutive time a day earlier, as it took market share in groceries and merchandise.
"We are seeing the consumer become increasingly resourceful and strategic on how they shop," Rick Gomez, Target's chief commercial officer, said on a media call.
Lingering weakness in higher-margin categories such as home decor, electronics and furniture has hurt Target this year, as shoppers watch their budgets in the face of still-high inflation.
US Ports Strike
Meanwhile, the company's efforts to pull forward holiday inventory in preparation for US ports strike led to additional costs in its supply chain, Target's executives said.
US dock workers and port operators went on a three-day strike in early October that shut down shipping on the East Coast and Gulf Coast ahead of the crucial holiday season, sending retailers scrambling to reroute shipments.
"Our earnings per share was short of expectations due to soft discretionary trends and multiple cost headwinds, including those unique to the quarter," Target's operating chief, Michael Fiddelke, said on the call.
Target executives said the company "acted quickly and decisively to reroute select shipments to protect the key fourth quarter seasonal programmes, that came with additional cost" which hurt its profit in the reported quarter.
Price Cuts
The Minneapolis-based company has cut prices on thousands of essential and gift items ahead of the holidays. It has launched discounts across its food, beverage and toys assortment along with a $20 Thanksgiving meal.
With five fewer holiday shopping days between Thanksgiving and Christmas in what is expected to be a so-so holiday season, retailers such as Target face competition as promotions at Walmart, Amazon.com kicked off earlier than usual.
Target, which operates nearly 2,000 US stores, reported third-quarter adjusted earnings of $1.85 per share. Analysts on an average were expecting $2.30 per share.
Apparel sales were soft as warmer than usual weather across the US deterred spending on winter clothing, while spending in sporting goods and beauty was strong during the quarter.
Overall, shopper visits rose 2.4% in the three months ended 2 November, lower than 3% traffic growth in the prior quarter. Store originated comparable sales dropped 1.9%, partly offset by a 10.8% jump in digital sales.
It posted comparable sales increase of 0.3%, well below analysts' average estimate of a 1.4% rise, according to data compiled by LSEG.
