A few months after suggesting a sales turnaround is afoot, Target (TGT) has offered up an earnings day misfire from start to finish.

On Wednesday, the retail giant badly missed third quarter Wall Street profit forecasts, slashed full-year guidance after raising it the previous quarter, and took a cautious stance on holiday sales and profit.

Its shares sank 16% in premarket trading on the heels of the release of its quarterly results.

By contrast, its rival Walmart (WMT) beat expectations again — significantly — with its quarterly same-store sales performance, online sales growth, and overall narrative to investors. Target has been slashing prices on food and other everyday essentials this year in a bid to compete.

On a call with reporters, Target execs offered up little explanation for the U-turn in results, except to note that consumers are spending “cautiously” in more discretionary departments such as home goods. The company also felt the brunt of unplanned costs in its supply chain as it added more inventory than it sold in the quarter — never a recipe for success for a retailer.

Target’s veteran chairman and CEO Brian Cornell told Yahoo Finance it has the “appropriate approach” for the holiday season but is “guiding for some conservatism.”

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Cornell added the holiday shopping season is off to a “really good start” but acknowledged the biggest days are ahead of it. Walmart CFO John David Rainey told Yahoo Finance on Tuesday it has seen a brisk start to the holiday shopping season.

Target stock was up 9% year to date ahead of the results, lagging the S&P 500’s 24% advance. Walmart’s stock was up a cool 64% on the year.

“The stock seems constrained in the near term given the uncertainty of the holiday, in which Target faces headwinds from a promotionally/event-driven consumer and likely acutely benefitted, relative to other retailers, from the beneficial calendar a year ago (now a headwind), along with tariffs,” JPMorgan analyst Christopher Horvers wrote in a client note.

Horvers added, “Like they do so very often for retailers, comparable sales and gross margin matter, with the former a relatively low bar and the latter a high bar. Given uncertainty and share losses, we see Target as unlikely to roll forward to 2026 valuation anytime soon.”

Here’s what Target reported for the third quarter, compared to Wall Street analyst estimates compiled by Bloomberg:

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• Net sales: up 1.1% year over year to $25.7 billion, vs. estimates for $25.74 billion

• Gross profit margin: 27.2% vs. 27.4% a year ago, vs. estimates for 28.7%

• Diluted EPS: down 11.9% year over year to $1.85, vs. estimates for $2.30 (guidance: $2.20 to $2.40)

• Comparable sales: up 0.3% year over year, vs. 1.48% estimate (last year comparable sales fell 4.9%; Walmart US reported a 5.3% gain in the third quarter of 2024)

• Inventory grew at a faster pace than sales, up 3% from the prior year.

• The company repurchased $354 million of its stock in the quarter. $9.2 billion remains available to repurchase under a prior authorization.

• The number of transactions rose 2.4% in the quarter, while the average transaction amount dropped by 2%.

• Target ended the quarter with about $3.4 billion in cash.

• Fourth quarter earnings per share are projected to be $1.85 to $2.45, compared to estimates of $2.65.

• Full-year earnings per share are projected to be $8.30 to $8.90 (previous: $9 to $9.70), compared to estimates for $9.61.

Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com.

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