Target gave disappointing guidance for the key holiday period early Wednesday after badly missing earnings estimates for the third quarter. Target stock dived to a one-year low.
That stands in sharp contrast to rival Walmart. On Tuesday, the Dow Jones retail giant beat views and signaled a solid start to the key shopping season.
A few Wall Street firms said Wednesday that Target appears to keep losing share to Walmart. On a Tuesday earnings call with analysts, Walmart CEO Doug McMillon said: "Households earning more than $100,000 made up 75% of our share gains."
Target is widely seen as appealing to higher income consumers, though the Walmart chief did not name any specific rival in his comments.
Target Earnings
Target earnings fell 12% vs. a year earlier to $1.85 per share, while revenue rose just 1% to $25.67 billion. Analysts had expected the big-box retailer to deliver earnings of $2.30 per share on sales of $25.876 billion. It was the biggest EPS shortfall in two years, FactSet shows.
Same-store sales edged up 0.3%, below forecasts for 1.5% growth. Margins shrank 0.2 percentage points vs. the prior year to 27.2%, which the retailer tied to higher digital fulfillment and supply chain costs.
For the fourth quarter, Target sees EPS of $1.85-$2.45, well below analyst targets of $2.65. Comparable sales are now seen flat.
Executives cited continued weakness in discretionary sales, which include things like apparel and consumer electronics, as well as costs tied to the short-lived ports strike.
Target Stock
Shares of Target plunged 21.4% to 121.76 in Tuesday's stock market trading. Target stock made a new 52-week low intraday.
In the past year, Target stock has lagged Walmart and Costco shares by a mile. A larger focus on discretionary goods weighed on the bull's-eye retailer, though it also sells food and consumables. More higher-income consumers, Target's traditional audience, sought out Walmart for value as inflation rose.
On Tuesday, Walmart raised full-year guidance after beating earnings and revenue estimates for its third quarter. Analysts called recovering merchandise sales a highlight of the quarter.
Nvidia Due With AI Giant Back In Buy Zone
Other Retail Earnings: TJX, BJ's Wholesale Club
Among other off-price and discount retailers, TJX beat Q3 earnings and revenue views early Wednesday. Year over year, EPS rose 11% and sales gained 6%. But fourth-quarter guidance came in below views. Analysts had forecast a 6% EPS increase vs. a year ago on a 5% revenue gain. TJX stock clawed back intraday losses, closing up 0.1% and near a 121.13 buy point.
BJ's Wholesale Club is due before Thursday's open. TJX peer Ross Stores is on deck late Thursday. On Wednesday, BJ stock fell while Ross Stores closed almost unchanged.
Investors are watching management commentary on inflation, deflation and consumer financial health. Meanwhile, analysts say potential new Trump tariffs could become a headache for retailers.
