Target’s cost-cutting draws more shoppers, but they aren’t putting much more in their carts

Heading into the all-important holiday months, budget-conscious Target customers shopped more but didn’t necessarily spend more.

That complicated Target’s financial results for August, September and October. Profits declined 12% year over year to $854 million for the quarter, the company said Wednesday.

Shares immediately plunged in pre-market trading after the news was released at 5:30 a.m.

Target has over the past six months slashed prices — and then slashed more of them.

“That’s driving traffic to our stores,” Target CEO Brian Cornell said during a call with media. “We feel really good about the reaction we’re currently getting.”

The Minneapolis-based retailer saw a 2.4% bump in store traffic for the quarter that amounted to an extra 10 million transactions over the same quarter last year.

But revenue has not seen a corresponding lift.

“We’re still seeing consumers shop very cautiously, and we’re planning accordingly,” Cornell said.

Even with all those extra store visits — and a 10% increase in digital sales — discretionary spending on apparel, home goods and “hardline” items like appliances remained weak.

“As we look at the consumer, what we’re seeing is that they’re resilient, but also resourceful,” said Rick Gomez, chief commercial officer at Target. “They remain pressured, but are willing to spend when they find that right balance of new, on-trend items and great prices.”

He said October’s Target Circle week was the best yet, with a notable sales bump and 3 million new members in the loyalty program. A Blake Lively team-up also represented “our biggest hair care launch on record,” Gomez said.

The third quarter earnings failed to meet expectations. And with the revenue stagnation, Target lowered its financial outlook for the rest of the year.

One issue weighing on the bottom line: Target stocked up ahead of the short-lived East Coast port strikes, an expensive proposition.

“Our team took decisive action to … ensure we had inventory for the biggest season of the year,” Cornell said. “We don’t regret those actions.”

The bigger issues facing the retailer is getting consumers to spend more per basket, and increasing competition for its traditional demographic.

Walmart, which reporting strong results Tuesday, is attracting more high-income shoppers, contributing to a sizable increase in same-store sales year over year for the quarter.

Target’s comparable sales rose 0.3% in the quarter, missing analyst estimates. Revenue reached $25.2 billion. The company now expects full-year earnings per share in the range of $8.30 to $8.90 after upping its forecast last quarter to $9-$9.70.

“It’s disappointing that a deceleration in discretionary demand, combined with some cost pressures, have caused us to take our guidance back down,” said Chief Operating Officer Michael Fiddelke.

Though Target expects a robust holiday shopping season, officials expect sales for the fourth quarter, which ends in January, will be flat compared with last year.

“We’re guiding with some conservatism, hopefully there will be some upside as we get into the season,” Cornell said. “Some of the biggest days are still in front of us, obviously some big weeks ahead, and we’ll watch that carefully.”