Target Corp investors are losing patience with the retailer’s turnaround plan.

Target cut its full-year profit outlook Wednesday after a disappointing quarter, sending shares down more than 20%. Executives said shoppers are spending less on nonessential items like clothes and home products, and the company held onto more inventory ahead of the US port strike, leading to unexpected costs.

After a series of missteps in managing inventory and product assortment, pressure is mounting for chief executive officer Brian Cornell to rejuvenate sales in an increasingly competitive environment. Target’s results stood out against its rivals that are seeing growth, another warning sign that the retailer’s rebound strategy isn’t going according to plan.

“Investors are pretty fed up today with the pace of recovery from them,” Joe Feldman, an analyst at Telsey Advisory Group, said in an interview. “It really comes back to managing the operation.”

Walmart lifted its full-year guidance on Tuesday. The big-box retailer’s advertising and other newer businesses are fueling profit growth, and it’s gaining market share with higher-income shoppers. Walmart’s sales of clothes and other general-merchandise items grew in the low-single digits in the third quarter, and it’s seeking to expand its assortment online.

Costco Wholesale Corp also said this month that its monthly sales of nonfood grew in the low-double digits, fueled by items like jewelry and home furnishings. Other retailers, including Home Depot Inc and Lowes Cos, have lifted their full-year guidance this earnings season.

Target has been seeking to reverse soft sales going back more than a year. The business boomed during the pandemic as consumers rushed to decorate their homes and stock up on essentials like toilet paper. That came to an end in late 2022, when people pulled back on discretionary products due to high prices.

Target’s Pride collection garnered immense backlash and hurt sales last year. The company posted strong results over the summer, only to take a step back during the most recent quarter.

Target executives defended their performance on a call with analysts Wednesday. They said the retailer stockpiled products in order to prioritise having full shelves ahead of the important holiday season. And while discretionary spending slowed further in recent months, there were still bright spots. Traffic grew, and so did sales of beauty and food products. Meanwhile, consumers were opening up their wallets to buy clothes, home goods and other discretionary products when they were affordable and new.

Analysts and investors were left questioning how much longer the recovery will take and to what extent Target’s challenges are specific to the company.

Some analysts downgraded their rating on Target shares or cut their price targets following the earnings report, while others said the market was overreacting. Shares of Kohls Corp and dollar stores, which cater to lower-income shoppers, also fell Wednesday.

“The issues at play are not only macro consumer headwinds, but TGT’s ongoing challenges to grow its market share and be a shopping destination in discretionary categories,” Morgan Stanley analyst Simeon Gutman wrote in a research note.

Cornell, a former Walmart executive who took the helm at Target a decade ago, said issues like the port strike were a one-time problem and that the company’s early read on holiday sales are positive. He said Target is working to control what it can control and that discretionary demand will normalise.

“We know America is going to buy sporting goods and toys,” Cornell said on a call with analysts. Nonessential products will continue to make up nearly half of Target’s business, he said.

  - Reuters