‘What they are doing is not working’

Continued from FP1

Target’s share price plunged as low as $57.30, the biggest intraday decline since 2008.

“We are stunned — we thought they were going the other way, with highermargin stuff,” said Brandon Fletcher, an analyst at Sanford C. Bernstein & Co. “We believe there is a better path, and we want to know why they stepped off into the wild.”

Target’s new strategy follows a game plan employed over the past year by WalMart. The world’s largest retailer is spending as much as $6 billion (all figures US) to lower prices across its aisles, according to Wolfe Research analyst Scott Mushkin. WalMart chief executive officer Doug McMillon said last week that “customers are responding” to the reductions, after the company reported its highest quarterly samestore sales increase in more than four years.

“This is similar to the path Wal-Mart chose in late 2015,” Stifel Financial Corp. analyst Mark Astrachan said in a note. “That said, Target’s size relative to Wal-Mart suggests increased risk in focusing on everyday low prices.”

Target’s gloomy outlook signals that CEO Brian Cornell has more work to do to reverse the weak traffic that marred its holiday season. Only 35 per cent of U.S. households shopped at Target in December, compared with 53 per cent who did so in December 2007, according to data tracker Kantar Retail.