• Target shares dropped sharply after its third-quarter earnings missed Wall Street estimates.
• The retailer cut its full-year financial guidance and reported sales growth of just 0.3%.
• CEO Brian Cornell said the retailer faces "unique challenges and cost pressures."

Target shares plunged as much as 22% Wednesday after the retailer posted disappointing third-quarter earnings and lowered its financial guidance for the year.

The Minneapolis-based retailer reported adjusted earnings per share of $1.85, down just under 12% year-over-year. Analysts had expected earnings per share of around $2.30.

"When we assess the consumer and macro environment, we're seeing many of the same themes that have defined the environment for some time," CEO Brian Cornell told investors on the earnings call. "Consumers tell us their budgets remain stretched, and they're shopping carefully."

Target has struggled to boost discretionary sales as consumers across the country are spending less money on non-essential items.

Revenue was lower than expected at $25.7 billion, compared to Wall Street forecasts of $25.9 billion, up 1.1% compared to the same period in 2023. Store comparable sales declined 1.9%, offset by growth online.

"Consumers are still spending, but they're focused more on essentials and have become far pickier about discretionary products and have cut back on the number of impulse purchases," GlobalData retail analyst Neil Saunders said in a note. "All these things undermine the Target model which partly relies on a robust consumer who is comfortable loading their cart with things that they want, but do not absolutely need."

In the release, Target also cut its full-year financial guidance, saying it expects earnings per share of between $8.30 and $8.90. At its second-quarter earnings in August, the retailer said it expected full-year EPS of between $9 and $9.70.

Cornell also noted "unique challenges and cost pressures" that weighed on the quarter's profitability, including the East and Gulf Coast port strikes, two hurricanes, and unseasonably warm weather.

Alongside lower-than-expected EPS, Target's profit fell 12.1%, down to $854 million compared to $971 million in the third quarter of 2023.

One bright spot for the company was a 10.8% boost in digital transactions, which helped to deliver the slow rise in overall sales, partially driven by the company's Circle 360 loyalty program.

The company said it added 3 million new members in the quarter, and saw an additional 10 million digital transactions during the period.

As of Wednesday morning, Target's share price was down around 15% in 2024 so far, lagging far behind retailers like Walmart and Costco, which have risen 62% and 42% this year, respectively.