Target battered by rival Walmart as shoppers look for deals
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Target CEO Brian Cornell in 2019. Photo: The Walt Disney Company/Image Group LA via Getty Images
Target's worst earnings report in years didn't just send the company's stock price off a cliff, it also sent a marketwide signal that inflation-wary shoppers will likely be more cost-conscious this holiday season.
Why it matters: The Minneapolis-based retailer is losing some of its affluent customers to Walmart and other lower-cost competitors, according to analysts.
Catch up quick: Target's third-quarter earnings Wednesday came in 20% below Wall Street's expectations, and the company lowered its expectations for the highly important fourth quarter, which includes the holiday shopping season.
- The company's stock fell 21% after the release.
Threat level: Target's disappointing earnings came a day after Walmart released strong third-quarter results. Yahoo Finance reported that 75% of the Arkansas company's gains came from households making more than $100,000 per year — who have been Target's typical shoppers.
- "Target is losing market share," Edward Jones analyst Brian Yarbrough told the Star Tribune.
- Target's stock price is down about 6% over the past year while Walmart's is up 68%.
By the numbers: Although Target slashed prices this year, Melius Research Analyst Karen Short estimated that Target's prices remain 4%-5% higher than Walmart on essential items, according to Barron's.
What they're saying: Target CEO Brian Cornell noted on a call with investors that while traffic to stores was up in the third quarter, shoppers are buying less as "consumers continue to spend cautiously, most notably in discretionary categories."
What we're watching: A recent survey by Minneapolis-based Thrivent found that 2 out of 3 Americans "have concerns about how they'll manage their holiday finances this year" and one-third plan to purchase less expensive gifts.
- Target will likely feel more pain from this because it relies more on discretionary purchases.
- Groceries account for about 20% of its sales, versus 60% at Walmart.
What's next: Target said it's planning to cut prices even more during the holiday season.