Target fell short of their sales and earnings expectations for the just concluded quarter as fans chose to shop at Walmart to save money. Profits dropped by 12% year-on-year to $854 million, and the stock price fell significantly by 21% to $121.72.
According to their earnings report for the quarter, this occurrence marks the company’s largest stock price drop in 24 hours since May 2022. In order to win back customers, Target is offering price slashes to match their competitors Walmart and Amazon.
Target CEO addresses the shocking earnings report
Target’s CEO Brian Cornell admitted to feeling disappointed about the recent earnings report; however, he believed the retail giant has the opportunity to bounce back in the long term. He added that the damage control, in the way of price cuts, seems to be working too, as customers are making their way back to Target stores.
Despite this, customers are being extra frugal about their spending and are only purchasing necessities. For now, Cornell thinks the company would maintain the same strategy to keep buyers close. In contrast, Walmart has been seeing more high-income shoppers, causing Target to reduce its expectations for the end-of-business-year earnings report.
Target needs to strategize following the stock price drop
Managing director of GlobalData, Neil Saunders, reacted to Target’s earnings report, hoping that 2025 will bring a stronger economy to help the retail company bounce back. He also suggested a change of strategy ahead of the coming year, as other competitors are eating into their market share.
According to Chief Operating Officer Michael Fiddelke, cost pressures—such as the risky stock-up ahead of the East Coast port strikes and a drop in discretionary demand—have forced them to review their forecasts. Earnings per share are now between $8.30 and $8.90, as opposed to the former $9 to $9.70.