As the holiday season approached, Target customers bought more items but didn’t spend extra money.
This made Target’s financial results for August, September, and October more challenging. The company reported a 12% drop in profits compared to last year, bringing profits down to $854 million for the quarter. After this news was announced at 5:30 a.m., Target’s stock price fell sharply in early trading.
Over the last six months, Target has been cutting prices repeatedly.
“These price cuts are bringing more people to our stores,” said Target CEO Brian Cornell during a media call. “We’re happy with the positive response so far.”
The company, based in Minneapolis, reported a 2.4% increase in store visits for the quarter, with 10 million more transactions compared to the same time last year.
However, this increase in traffic hasn’t led to higher revenue.
“Customers are still being very careful with their spending, and we’re adjusting our plans accordingly,” Cornell explained.
Despite more store visits and a 10% growth in online sales, customers spent less on non-essential items like clothes, home goods, and appliances.
Target’s Chief Commercial Officer, Rick Gomez, explained, “Shoppers are showing both resilience and resourcefulness. While they feel financial pressure, they are willing to spend when they find the right mix of trendy products and great prices.”
He highlighted October’s Target Circle week as the most successful ever, with a big boost in sales and 3 million new loyalty program members. Gomez also noted that a recent collaboration with Blake Lively marked Target’s largest hair care product launch to date.
Target’s third-quarter earnings fell short of expectations, and with little revenue growth, the company has lowered its financial forecast for the rest of the year.
One costly challenge was stocking up early to prepare for potential disruptions from the short-lived East Coast port strikes. “Our team acted quickly to ensure we had enough inventory for the holiday season,” said CEO Brian Cornell. “We stand by that decision.”
The bigger challenges for Target are encouraging customers to spend more per visit and dealing with increasing competition for its core shoppers. Walmart, for instance, reported strong results earlier this week, with more high-income customers boosting their same-store sales significantly.
Target’s same-store sales increased by only 0.3% for the quarter, missing analyst predictions. Revenue reached $25.2 billion, and the company now expects full-year earnings per share to be between $8.30 and $8.90, down from its earlier forecast of $9 to $9.70.
“It’s disappointing to lower our guidance due to weaker demand for non-essential items and rising costs,” said COO Michael Fiddelke.
While Target is optimistic about the holiday shopping season, it predicts fourth-quarter sales will remain flat compared to last year. “We’re being cautious in our projections but hope to see better results as the season unfolds,” Cornell said. “The biggest shopping days and weeks are still ahead, and we’re watching closely.”