Target (TGT) earnings in the third quarter of 2024

Goal on Wednesday missed Wall Street’s quarterly earnings and revenue expectations and posted only a slight increase in customer traffic despite the discounter’s price cuts on thousands of items and its early holiday sales.

The big-box retailer reversed course and lowered its full-year profit forecast, just three months after raising that forecast. It said it expects full-year adjusted earnings per share to range from $8.30 to $8.90. That’s lower than the range of $9 to $9.70 per share it shared in August and below $9.55 a share. expected by analysts according to StreetAccount.

Target now expects comparable sales in the fourth quarter to be roughly flat. This measurement, also known as same-store sales, includes sales on its website and stores open for at least 13 months.

Target missed Wall Street’s earnings per stock estimate by 20%, the biggest miss in two years. It also marked its first revenue since August 2023.

The company’s shares fell more than 15% in premarket trading.

Speaking to reporters, CEO Brian Cornell said “continued softness in discretionary categories” and costs associated with rush shipments and preparing for the short-lived port strike in October hurt the company’s quarterly results.

Chief Operating Officer Michael Fiddelke said “it is disappointing that a slowdown in discretionary demand combined with some cost pressures has caused us to lower our guidance after raising it last quarter.” But he added that Target feels confident about its long-term prospects.

Here’s what Target reported for the three-month period ended Nov. 2 compared to what Wall Street expected, based on a survey of analysts by LSEG:

• Earnings per stock: $1.85 vs. $2.30 expected
• Income: $25.67 vs $25.90 billion expected

Target, known for its cheap and smart spin on clothing, home goods and other discretionary goods, has struggled to attract steady foot traffic and higher sales. Shoppers have been selective about spending after cumulative years of more expensive food, housing and more.

To woo price-sensitive consumers, Target announced in May that it would reduce the prices of around 5,000 frequently purchased itemsincluding nappies, bread and milk. It announced another wave of price cuts in October on more than 2,000 holiday season items, including cold medicine, toys and ice cream.

Target said it will have lowered prices on more than 10,000 items this year by the end of the holiday season.

Target offered these discounts after hearing from shoppers about “the importance of value and affordability,” Chief Commercial Officer Rick Gomez said. He added that the price cuts on frequent items leave more room in customers’ budgets to spend on products they want, whether it’s a new outfit or beauty items.

Still, those price cuts weren’t enough to lift Target’s third-quarter performance.

Target posted a comparable sales gain of 0.3% as customers spent more on its website but less in its stores. That fell short of the 1.5% gains analysts were expecting, according to StreetAccount.

Target’s third-quarter pretax net income fell about 12% to $854 million, or $1.85 per share, from $971 million, or $2.10 per share, in the year-ago quarter. Revenue increased from USD 25.40 billion in the same period last year.

Customer traffic across Target’s stores and website grew 2.4% year over year. Digital sales were a bright spot, growing 10.8% year-over-year due to double-digit gains in curbside pickup and nearly 20% growth in same-day home deliveries. However, comparable store sales fell 1.9% year over year.

Customers gravitated to food and everyday items during the quarter, along with beauty items. Comparable sales in the category, which includes sales at Ulta Beauty stores inside Target, rose more than 6%. Two other categories, food and drink and essential goods, showed low single-digit increases compared to the year-ago period.

The Minneapolis-based retailer’s results clash with trends at Walmart, which on Tuesday reported improved sales trends in discretionary merchandise for the second straight quarter. Walmart also said it is gaining market share among high-income households.

The two major retailers have a different sales mix, however, with groceries accounting for about 60% of Walmart’s U.S. business but only about 23% of Target’s in the most recent fiscal year, according to the companies’ financial filings.

Gomez said the retailer struggles with savvy and selective shoppers who aren’t willing to buy until the price is right.

“Consumers have become increasingly resourceful and strategic in how they shop,” he said. “They know there are deals out there. They’re willing to search for them, and they’ll wait for just the right moment to walk into our stores or log into our app.”

For example, Gomez said the week leading up to Target’s Circle Week, a promotional event in October, was quieter. But it was the biggest Circle Week to date in terms of sales, and 3 million new members signed up to Target’s loyalty program, he added.

Gomez said Target sees momentum when it offers eye-catching merchandise, such as debuting new exercise equipment, pet accessories, seasonal flavors of food or a fresh hair care line.

Higher supply chain costs posed another challenge in the quarter, Fiddelke said. As the company prepared for the port strike, which ended up lasting a few days, Target rerouted and rushed shipments and restocked inventory to ensure it had the items it needed for the holiday season.

“It was going to cost,” he said. “It meant we were more saturated a little earlier in the quarter than we wanted to be, and we’re never quite as efficient when our buildings are full, but we felt it was the right decision to really protect the guest experience. “

Shares of Target have lagged behind the S&P 500. As of Tuesday’s close, Target’s stock is up about 9.5% this year, compared with the S&P 500’s gains of about 24% over the same period. The company’s share price of around $155 is also well off the pandemic highs, as the stock rose to nearly $270.

— CNBC’s Robert Hum contributed to this report.