Target issues a caution about holiday shopping why?... Target forecasts a slow holiday shopping season, which serves as a warning to the retail industry.
Target reduced its profitability projection on Wednesday, predicting that sales would remain stable in the year’s final quarter. Furthermore, Target’s most recent quarter had a disappointing 0.3% increase in revenue.
Target (TGT) shares fell as much as 20% in pre-market trade on Wednesday.
Target is an outstanding indicator of consumer spending patterns and the retail industry in general, and the negative news prompted rivals’ stocks to plunge on Wednesday as well.
For retailers, the holiday shopping season is crucial. While many smaller businesses rely on high Christmas sales, Target can weather a challenging holiday season.
Target is faltering because its core middle-class customer base is being squeezed by growing prices, which are pushing people toward everyday necessities like groceries rather than luxuries like technology, home décor, and non-essential apparel.
However, Target’s inventory mix and higher prices than rivals like Walmart have caused its stock to drop. The company carries more non-essential items than rivals like Walmart (WMT) and Costco (COST).
Target is more vulnerable to changes in consumer opinion than its rivals because more than half of its products are discretionary.
Target still lags behind Walmart, which receives about half of its revenue from groceries, despite adding more food and necessities to its shops in recent years.
In an attempt to attract customers, Target has lowered the cost of hundreds of items in recent months, but the effect on sales has been minimal.
Walmart is booming while Target is having trouble.
Walmart reported on Tuesday that its profit increased 8.2% last quarter and that its US sales at stores that have been open for at least a year increased 5.3% from the previous year.
Walmart signaled that it anticipates a robust holiday shopping season by raising its financial projections.
Walmart said that “primarily from upper-income households,” it increased its market share in the most recent quarter.
75 percent of the company’s profits came from households earning more than $100,000 annually. Target issues a caution about holiday shopping why?
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