Target reported profits Wednesday that were far below Wall Street expectations, with the big retailer blaming it on lower-than-expected demand.
The company reported earnings that were 20% lower than expected, the biggest surprise in two years. Meanwhile, revenue fell short of expectations for the first time in more than a year.
As a result, Target’s stock price fell more than 21% on Wednesday.
Despite a much-publicized campaign offering discounts on thousands of items and an earlier holiday sale, the results were disappointing.
Target CEO Brian Cornell said on a call with reporters that the quarter’s disastrous results were due to “lingering weakness in discretionary sectors” and preparations for a short-lived port strike in October. He blamed the costs involved.
“We are disappointed that the combination of slowing discretionary demand and some cost pressures has caused us to lower our outlook after raising it last quarter,” Target Chief Operating Officer Michael Fidelke said in a statement. added.
Although the company lowered its profit and sales targets for this year, Fidelke said Target remains confident in its long-term outlook.
But broad stock trading did not react immediately, as Wall Street awaited gains from chipmaker Nvidia, which has helped drive the market higher throughout the year. But when combined with other indicators, such as a slowdown in holiday hiring, it could suggest that sales in the all-important final quarter of the calendar year could be slower than expected.
Target’s report came a day after rival Walmart reported better-than-expected profits and sales.
But even Walmart noted that customers are still often hesitant to take advantage of attractive deals, especially as food prices rise.
“We expect this holiday period to be very consistent with that,” Walmart Chief Financial Officer John David Rainey told CNBC. “They are focused on price and value.”
