"It shows that its consumer is still struggling," said Ken Perkins, president of Retail Metrics, a research company.
Target, based in Minneapolis, initially struggled during the economic slowdown. Its fashion-forward image hurt it during the downturn as people didn't perceive Target as having the best prices.
But the retailer expanded its food offerings and began to emphasize low prices in its advertising — two things that put it in direct competition with Wal-Mart. It also started a 5 percent discount program for those who use its branded credit or debit cards.
But its focus on prices and groceries cost it some cachet, and performance has been choppy. The latest results show that Target seems to have found the right balance between offering low prices and boosting its offering of fashion merchandise. Revenue at stores open at least a year rose 2.9 percent, roughly in line with Wall Street estimates.
For the fourth quarter, which ends in January, Target says that it anticipates adjusted earnings of $1.64 to $1.74 per share. Analysts predict $1.51 per share.
"Looking ahead, we are confident in our holiday merchandising and marketing plans," Kathee Tesija, Target's executive vice president of merchandising, told investors on Thursday.
This holiday shopping season, both discounters are to catering to their different customers.
Wal-Mart last week said it will offer deeper discounts and a broader assortment of merchandise. It's also deepening its offerings on products it knows shoppers will want. The company also started its holiday layaway program a month earlier than a year ago and lowered its fees for the program from $15 to $5.
The move seems to working. It has booked an additional $300 million in layaway business compared to a year ago. The company will record sales for layaway during the fourth quarter.
Target, on the other hand, is trying to appeal to higher-end shoppers.