Target’s profits plunged 52% in the third quarter, and the retailer warned of a tough holiday season.
Target blamed inflation and a deteriorating economic outlook for its poor quarter, and cut its outlook for the rest of the year. That sent shares down more than 12% in premarket trading.
Chief executive Brian Cornell said that in recent weeks “sales and profit trends have slowed significantly, with guests’ shopping behavior increasingly influenced by inflation, rising interest rates and economic uncertainty.”
It wasn’t all plain sailing, though: Sales of essentials, including food and household staples, were strong. Similar to Walmart, Target said sales in “discretionary categories” such as electronics and apparel were holding back its profits.
Target (TGT) plans to cut costs by $3 billion over the next three years in an effort to “simplify its business and improve efficiency, with a focus on reducing complexity and lowering costs,” it said.
Looking ahead to the busy holiday shopping season, Cornell said, “The rapidly changing consumer environment means we are planning more conservatively for the remainder of the year.” Target forecast low sales at stores open for at least a year. The percentage of digits decreased.
A glut of inventory at Target earlier this year forced the company to offer deep discounts on big-ticket items to alleviate the problem. It lowered prices on some discretionary purchases canceled by consumers and canceled pending orders from suppliers.
Target shares are down more than 20% this year.