Target stock is falling: Price slashing may not be enough to improve 2024 holiday sales

Shares in Target Corporation (NYSE: TGT) have plummeted this morning in premarket trading after the company announced disappointing third-quarter results and a revised full-year outlook that did not inspire confidence in investors.

TGT shares are currently trading down nearly 18% to $127.32 at the time of this writing. Shares had closed at $156 yesterday. Here’s what you need to know about Target’s latest results.

A disappointing Q3

Target definitely did not hit the mark when it came to its third quarter of 2024, which ended on November 2. The company reported the following:

• Revenue: $25.67 billion
• Diluted earnings per share: $1.85

However, while Target’s revenue grew slightly over the same period a year earlier (up 1.1%), the company saw its diluted earnings per share drop by 11.9% compared to the previous quarter.

Worse, Target did not meet the expectations of Wall Street analysts. As CNBC notes, analysts had been expecting revenue of $25.90 billion and an EPS of $2.30.

Target did have a few bright spots for the quarter, but those couldn’t offset the company’s negatives. For example, the company grew its Digital Comparable Sales by 10.8%—nearly 20%—in the period. It also saw customer traffic increase by 2.4%. Despite this, Store Comparable Sales fell 1.9%.

What’s behind Target’s depressed Q3?

Target blamed a few different things for its disappointing third quarter. The first was the short-lived port strike in October. The company’s chief operating officer, Michael Fiddelke, said Target stocked up on inventory ahead of the strike, something that ended up costing the company.

“That came at a cost,” Fiddelke said on an earnings call. “It meant we were fuller a little bit earlier in the quarter than we would like to be, and we’re never quite as efficient when our buildings are full, but we felt like that was the right decision to really protect the guest experience.”

Another issue that affected Target’s revenues was “lingering softness in discretionary categories,” according to Target CEO Brian Cornell.

A large chunk of the products Target sells are discretionary items—household goods, clothing, and similar merchandise. However, as inflationary headwinds have caused prices to rise over the past few years, consumers are now pulling back their spending on discretionary items in favor of necessities like food.

Target does sell groceries, but as CNBC notes, only about 23% of its business comes from consumable goods.

A revised full-year outlook

While Target missed Wall Street’s earnings per share estimate by 20%, the thing that likely spooked investors the most was Target’s revised full-year guidance. For fiscal 2024, Target now expects adjusted EPS in the range of $8.30 to $8.90. That’s down from the $9.00 to $9.70 range the company had forecast in August.

The revised outlook also signals that customers may not be taking to Target’s price cutting as much as the company and investors had hoped. Back in October, Target boasted it would have lower prices on “more than 10,000 total items during the holidays.”

These lowered prices encompass holiday goods such as toys, board games, snacks, beverages, cookies, ice cream, and everyday essentials like cough and cold medicine and toilet paper.

Target’s revised outlook suggests such lowered prices may not be enough to have the holiday quarter investors would have hoped.

TGT stock falls double digits

Before today’s Q3 results were announced, Target’s share price had been up 9.5% year-to-date. However, with its nearly 18% price drop before the opening bell this morning, TGT shares are now firmly in the red for the year.

Still, CEO Brian Cornell says the company has faith in its future. In a press release announcing the company’s Q3 results, Cronell said, “we remain confident in the underlying strength and fundamentals of our business, and our ability to deliver on our longer-term financial goals.”