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Target shares were forecast to open nearly 14% lower, dragging
down other retailers. Macy's Inc, Costco, Best Buy and Dollar
Tree were set to fall between 2% and 4%.
Target's larger competitor Walmart slipped nearly 2%, a day
after lifting its annual sales and profit forecast as demand for
groceries held up despite higher prices.
"After so many emergency rate hikes it's now affecting the
consumer a little bit and I think it's evidenced in Target
today," said Thomas Hayes, managing member at Great Hill Capital
LLC in New York.
Target, which said third-quarter profit had halved, warned of
"dramatic changes" in consumer behavior, leading to a drop in
demand for everything from toys to home furnishings.
U.S. stock index futures pared gains after Target's update,
which was reminiscent of its quarterly report in August when it
posted a bigger-than-expected 90% fall in earnings.
With annual inflation running at 7.7% in October and high
interest rates, shoppers are skimping on discretionary spending,
a gloomy prospect for a sector that relies on year-end shopping
for a large portion of its annual sales.
U.S. Commerce Department data due out later in the day is
expected to show U.S. retail sales rose 1% in October after no
growth in September.
Target shares lost 22.7% of their value since the start of the
year until Tuesday, while Walmart edged up 1.9%. The broader S&P
500 retailing index has shed about 29.4% in the same period.
(Reporting by Medha Singh in Bengaluru; additional reporting by
Bansari Mayur Kamdar)
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