Target’s shares plunge 21% after huge earnings miss
Target made a bet on courting lower-income consumers. So far, it hasn’t worked.
Target severely missed earnings expectations on Wednesday, spooking investors who are now sending the retailer’s stock price toward its worst daily drop in over two years and its third-worst day in the stock market ever.
The company’s share price tanked 21% on Wednesday morning after it reported a sales decline, lower profit, and a stockpile of unsold inventory. The last time its stock took a hit bigger than that was in May 2022, when it dropped 25%. Wednesday’s decline would erase more than $15 billion of market capitalization.
Target slashed its forecast for full-year earnings per share to between $8.30 and $8.90, down from its prior range of $9 to $9.70. You know it’s not good when a company’s new best-case scenario is lower than its previous worst-case scenario.
Target’s earnings miss came after Walmart, seen as an industry bellwether, exceeded Wall Street’s expectations on Tuesday.
Walmart reported lower transactions but with larger average ticket sizes. Target, which announced earlier this year that it was lowering prices on thousands of items, appeared to be taking the opposite approach — banking on customers spending less each time but driving more traffic. In its most recent quarter, though, the number of transactions and ticket sizes both declined.
Analysts at Telsey Advisory Group said in a Wednesday-morning research note that Walmart might be stealing market share from Target’s core customers.
“We understand the challenging macro environment and select cost pressures, but Target may be losing share among its middle- to upper-income consumers to retailers like Amazon, Costco, and Walmart,” the analysts wrote.
