Written by Saviyata Mishra
(Reuters) – Target sales for the holiday quarter and earnings fell short of estimates on Wednesday as value-conscious consumers shopped for low-priced basics at rival retailers including Walmart, sending its shares down 18% in pre-market trading.
The U.S. retailer now expects similarly flat sales in the fourth quarter and earnings of $1.85 to $2.45 per share. Analysts on average were expecting a 1.64% rise in sales and earnings of $2.66 per share.
Target also trimmed its annual earnings per share forecast to between $8.30 and $8.90 from its previous range of $9 to $9.70 after weaker-than-expected third-quarter results.
The results contradict the world number. No. 1 retailer Walmart, which raised its annual sales and profit forecasts for the third straight time the day before, took on market share in grocery and merchandise stores.
“We’re seeing the consumer becoming increasingly resourceful and strategic about how they shop,” Rick Gomez, Target’s chief commercial officer, said on a media call.
Persistent weakness in higher-margin categories like home decor, electronics and furniture has hurt Target this year, as shoppers watch their budgets in the face of still-high inflation.
Meanwhile, Target executives said the company’s efforts to delay holiday inventory in preparation for the U.S. port strike resulted in additional costs in its supply chain.
U.S. dockworkers and port operators went on a three-day strike in early October, shutting down shipping on the East Coast and Gulf Coast ahead of the crucial holiday season, sending retailers scrambling to reroute shipments.
“Our earnings per share were below expectations due to soft estimate trends and multiple cost headwinds, including those unique to this quarter,” Michael Fedelke, Target’s chief operating officer, said on the call.
Target executives said the company “acted quickly and decisively to redirect select shipments to protect key seasonal programs for the fourth quarter, which came at an additional cost,” hurting its earnings in the reported quarter.
The Minneapolis-based company has reduced prices on thousands of essential items and gifts ahead of the holidays. It has launched sales on its food, beverage and gaming range as well as a $20 Thanksgiving meal.
With the number of holiday shopping days reduced by five between Thanksgiving and Christmas in what is expected to be an average holiday season, retailers like Target are facing competition with promotions at Walmart and Amazon.com starting earlier than usual.
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