Target shares plunged more than 17% in early trading after the retailer missed quarterly expectations and lowered forecasts for the holiday season.
The surprise drop in holiday-quarter sales was due to surging inflation and “dramatic changes” in consumer spending, the company said Wednesday.
Target´s operating profit margin for the quarter sits at 3.9%, missing estimates for 5.35%. The big-box retailer cut its third-quarter profit by half.
On a call with reporters, CEO Brian Cornell said Target is still looking for ways to use its scale to become more efficient. “Clearly it’s an environment where consumers have been stressed,” Cornell said. He explained that in the latter weeks of the quarter, sales and profit trends softened meaningfully. “This resulted in a third quarter profit performance well below our expectations.”
Target said it would launch a cost-cut plan to save $2 billion to $3 billion over three years. The company was not specific but said mass layoffs or freezing hirings are not considered.
Despite consumers spending less hit all retailers, Target’s impact was bigger for relying more on discretionary items such as clothing, home furnishings and electronics. The company was forced to move into a massive discount plan to clear excess inventory, taking a toll on its profits.
