(Reuters) – Target Corp shares tumbled 13% in premarket trade on Wednesday and dragged down rival retailers after warning sales would slide in the holiday quarter and announcing plans to save up to $3 billion in cost cutting to shore up profits.
Shares in other U.S. retailers, which like Target have been offering sharp discounts to clear inventories, also fell. Macy’s Inc was down 3%, while Costco shed 1.7% and Best Buy slipped 3.4%.
“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 for a drop in demand for everything from toys to home furnishings.
U.S. stock index futures briefly fell after Target’s update.
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.
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 later in the day is expected to show U.S. retail sales rose 1% in October after no growth in September.
(Reporting by Medha Singh in Bengaluru; additional reporting by Bansari Mayur Kamdar)
