Can Target Turn Fortunes Around for the Holidays After 'Biggest Earnings Miss' in Years?

Delivering what CNBC termed the "biggest earnings miss" in two years via its Nov. 20 third-quarter earnings report, Target attempted to put a positive spin on the somewhat dreary results.

"I'm proud of our team's efforts to navigate through a volatile operating environment during the third quarter. We saw several strengths across the business, including a 2.4 percent increase in traffic, nearly 11 percent growth in the digital channel, and continued growth in beauty and frequency categories. At the same time, we encountered some unique challenges and cost pressures that impacted our bottom-line performance," Target CEO Brian Cornell said in remarks attached to the company's earnings report.

With Target expecting full-year adjusted earnings per share (EPS) of $8.30 to $8.90 — a figure revised heavily downward from the company's earlier EPS projections of $9.00 to $9.70 delivered in August and short of the $9.55 expected by Wall Street — it appears that the company's view of the immediate future has become more restrained.

Further, Cornell indicated that rushing shipments in preparation for October's port strike and softer demand for discretionary items were at least partially to blame for the lingering challenges facing the retailer.

Target shares had tumbled by more than 21% as of 1:30 p.m. ET on Nov. 20 as a result of the news.

Target Projects 'Flat' Holiday Season, Despite Optimism From Competitors

In its report, Target indicated it expects flat comparable sales during the fourth quarter, in what CNN described as "a potential warning sign for the retail industry."

Gesturing toward flagging interest in discretionary sales that Target heavily relies upon — as well as increased competition from large competitors like Amazon and Walmart — CNN reporter Nathaniel Meyersohn illustrated a gloomy portrait of Target's current struggles.

"But Target has also slumped because of its merchandise mix and higher prices compared to rivals like Walmart. The chain stocks more non-essential merchandise compared to competitors such as Walmart and Costco. More than half of Target’s merchandise is discretionary, making it more susceptible than its rivals to swings in consumer sentiment," Meyersohn wrote.

In a bid to compete with Walmart, Target has been adding more groceries into its product mix: But is this move too little, too late, especially when going up against an industry leader already heavily invested in grocery offerings?

According to CNBC, Walmart's grocery items account for approximately 60% of its product mix, while — despite its best efforts to pivot on this score — Target's grocery lineup represents about 23% of its total product mix.

For its part, Walmart recently announced extremely strong quarterly earnings, with profit ticking upward by 8.2% year-over-year and strong growth in the customer segment earning $100,000 a year or more, signaling a broader consumer base for the blue-and-yellow brand.

Target's Holiday Strategy: Will It Pay Off?

Target isn't exactly ready to throw in the towel concerning this year's holiday sales season, however. It recently launched a series of ad campaigns ranging from the more traditional to humorously contemporary (featuring a "weirdly hot" Santa), and its website boasts an undeniably holiday-infused user interface. "All things Christmas," a subdivision of its "Holiday Shop" landing page, and its Holiday Price Match Guarantee feature prominently.

Target has also created buzz around its broader holiday experience, promoting a peppermint-swirl aesthetic both in-store and online, as well as creating holiday-themed areas within its locations. A 9-foot-tall Barry the Bear plush is also placed in some locations as a draw for the young and young-at-heart, and pop-up experiences (known as Target Wonderlands) will be taking place in several U.S. cities in celebration of the season.

Target has also improved its supply chain and distribution capabilities as of late. According to The Minneapolis/St. Paul Business Journal, the retailer has added four supply chain facilities this year, two food distribution centers, and an omnichannel "flow center" to improve package handling and shipping times.

Additionally, Target has committed to a price-cutting strategy it introduced in May to carry through the end of the holiday season. In October, the retailer doubled down its attempt to court cash-strapped customers, dropping prices on popular seasonal items such as toys, cold medicine, and ice cream.

By the end of the holiday sales spree, according to the company, it will have slashed prices on more than 10,000 products.

Will these initiatives be enough to improve the company's fortunes as the year comes to a close? Target's CEO seemed confident about the retailer's ability to hold its own this holiday season.

"Looking ahead, our team is energized and ready to deliver the unique combination of newness and value that holiday shoppers can only find at Target, and we remain confident in the underlying strength and fundamentals of our business, and our ability to deliver on our longer-term financial goals," Cornell said of the company's seasonal position and future goals.