What Happened?

Shares of general merchandise retailer Target (NYSE:TGT) fell 22.4% in the afternoon session after the company reported weak third-quarter results. Despite a modest increase in comparable sales driven by strong guest traffic and digital sales, same-store sales declined by 1.9%, reflecting a drop in in-store purchases. Profitability also came under pressure, as gross margin fell slightly due to higher supply chain and fulfillment costs. This,combined with elevated operating expenses, contributed to a significant EPS miss. Additionally, Target's full-year EPS guidance was reduced and missed significantly, further disappointing investors. Management called out "unique challenges and cost pressures that impacted our bottom-line performance." Overall, this was a surprisingly bad quarter.

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What The Market Is Telling Us

Target’s shares are not very volatile and have only had 4 moves greater than 5% over the last year. Moves this big are rare for Target and indicate this news significantly impacted the market’s perception of the business.

The biggest move we wrote about over the last year was 3 months ago when the stock gained 15.1% on the news that the company reported a "beat and raise" quarter. Target blew past analysts' revenue, gross margin, and EPS expectations. The top line growth was broad-based, as the company observed traffic growth in all six core merchandising categories. Looking ahead, it lifted its full-year EPS guidance. Overall, this was a solid quarter with some key areas of upside.

Target is down 14.9% since the beginning of the year, and at $121.61 per share, it is trading 31.6% below its 52-week high of $177.82 from March 2024. Investors who bought $1,000 worth of Target’s shares 5 years ago would now be looking at an investment worth $961.84.

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