Target rattled Wall Street on Wednesday with a downbeat earnings report showing a sales decline, lower profit and an unwelcome buildup of unsold inventory. The company also cut its forecast for the full year, a bad omen ahead of the critical holiday shopping season.
Target’s stock plunged 18 percent in premarket trading, putting it on track for its biggest daily decline in more than two years.
Sales at Target stores fell 1.9 percent last quarter, from the same period last year, offset somewhat by a 10.8 percent rise in online sales. The company said it expected sales to be flat this quarter and cut its forecast for full-year profit, almost entirely reversing an increase announced just three months ago.
Target had recently made improvements that drew shoppers to its stores, but the earnings setback suggests that there is more work to do. Brian Cornell, Target’s chief executive, said in a statement that the retailer was navigating through “a volatile operating environment.”
The weaker-than-expected report covered the period of back-to-school shopping and Halloween, which can signal more challenges during the holiday season, a crucial final weeks of the year. Retailers look to those seasonal events as indicators of how shoppers might spend around Thanksgiving and Christmas.
Target’s results stand in sharp contrast to its rival Walmart, which reported stronger-than-expected earnings on Tuesday and upgraded its full-year forecast.
Analysts have warned that strength at Walmart, considered a bellwether of the state of the U.S. consumer because of its size and the wide range of products it sells, could not necessarily be taken as a sign of things to come for the retail industry in general. Walmart’s low prices and investments in delivery and online sales has helped it attract shoppers across the income spectrum.
Target’s troubles have come as it focuses on cutting prices to win over shoppers squeezed by inflation. Last month, the company said that it would lower prices on more than 2,000 items, including Crisco vegetable oil, cat litter and a Bluey toy fire truck, and that it will have to cut prices on 10,000 items by the end of the year. Although the number of visits to Target increased 2.4 percent last quarter, the average amount that customers spent decreased 2 percent.
“We encountered some unique challenges and cost pressures that impacted our bottom-line performance,” Mr. Cornell said. But, he added, the company was still “energized” for the holiday shopping season.
The post Target’s Stock Sinks on Weak Sales Ahead of Holiday Shopping Season appeared first on New York Times.
