'Retail company performance falls but retail data rises? What's going on?'
The United States (US) Commerce Department published strong retail sales data for October, but the release of Target Corp's dismal 3rd quarter earnings report sent equities down.
The US retail giant projected a drop in consumer demand ahead of the holiday season (Christmas) and resulted in the company's shares falling 15% during New York session trading.
Commenting on Target's Chief Executive, Brain Cornell, the results of the 3rd quarter report were 'below expectations' with inflation and rising borrowing costs forcing consumers to change their spending patterns.
He explained that consumers 'feel stressed' due to the surge in inflation, the increase in interest rates and the uncertainty of the economic outlook until the occurrence of changes in household expenditure in meeting challenges in the future.
The change in consumer spending patterns was confirmed by Target's Chief Growth Officer, Christina Hennington, who indirectly lowered the company's forecast for the next quarter.
It's nothing new for Target as the retail giant has updated its forecasts several times this year, as it struggles to clear inventory and offer discounts to balance margins.
Therefore, Target put its sales forecast for the 4th quarter down to single digits based on the company's current performance pattern in November.
In addition, the company plans to reduce costs by $2 billion to $3 billion for the next 3 years, said Chief Financial Officer, Michael Fiddelke.
Meanwhile, a decline in Target's stock triggered investor selling in other retailer stocks with rival Walmart alone showing gains of 0.4%.
It also brought Wall Street's main indexes down with the Dow Jones Jones Industrial down 0.12%, the S&P 500 losing 0.83% and the Nasdaq Composite down 1.54%.
