Target earnings: not quite a bullseye

…In fact, they were, as Bob Uecker would say, juuuuuuust a bit outside. Target yesterday reported Q3 results more disappointing than Red One’s box office numbers.

• Revenue rose 1.1% to $25.7 billion, short of the $25.9 billion analysts expected. It’s the company’s first revenue miss since August 2023.
• Earnings came in at $1.85 a share, well below analysts’ expectations of $2.30. It’s Target’s biggest earnings miss in two years.

The company also cut its forecast for the full year after raising it last quarter, a not-so-great sign ahead of the holiday shopping season. Shares fell 22% on the day.

Swing and a miss

The bullseye retailer’s discouraging results came despite a heavily touted campaign to discount thousands of items, as well as a pushed-up holiday sale.

These did bring more people to stores – the number of visits to Target increased 2.4% last quarter – but caused the average amount customers spent to drop 2%. On a call with reporters, Target CEO Brian Cornell blamed the dismal quarter on “lingering softness in discretionary categories.”

• The company also pushed up product shipments last quarter in preparation for the US port strike, which led to higher inventory levels and dented profit.

Not all bad: Though same-store sales fell 1.9% in the quarter, digital sales grew 10.8%.

🤔 Zoom out: Target’s results run counter to Walmart, which reported stronger-than-expected earnings and raised its full-year forecast on Tuesday. ~75% of Walmart’s share gains last quarter came from households making over $100,000/year, a demographic that has historically favored Target.