NEW YORK (AP) — Target on Wednesday reported sluggish sales and slumping profits in the fiscal third quarter as inflation-weary customers curtailed their spending on apparel and other non-essential items.

The Minneapolis retailer fell short of Wall Street expectations for the quarter, and its profit and sales outlook for the final three months of the year also disappointed industry analysts. Costs related to a U.S. dockworkers’ strike in October also dragged on Target's results at a time when Americans are spending more selectively, the company said.

“We encountered some unique challenges and cost pressures that impacted our bottom-line performance,” Target Chairman and CEO Brian Cornell said.

The weak August through October period at Target stood in stark contrast to the third quarter of low-price rival Walmart, which reported another quarter of stellar sales Tuesday and released optimistic projections for the holiday season.

Target's outlook was particularly concerning because the discount merchandiser reduced prices on more than 2,000 products for the holidays and rolled out a Thanksgiving dinner deal that put the cost of the holiday meal below last year's total.

Target’s shares plummeted more than 21% in afternoon trading Wednesday, while Walmart's share rose nearly 3%, closing at $86.60 on Tuesday.

The disappointing quarter at Target may have reflected the financial circumstances and mood of U.S. consumers in the months before Election Day. Even as the overall inflation rate came down, voters told pollsters they were unhappy with the state of the economy when the costs of housing, food and other essentials remained so high compared to before the coronavirus pandemic.

Customers are “being very patient, shopping for promos, looking for great value on those essential items that they need for their pantry,” Cornell told reporters on Tuesday. “And they’re shopping very conservatively and have been in discretionary categories throughout the year.”

That consumer sentiment wasn't aligned in Target’s favor. Groceries account for about 60% of Walmart’s U.S. business, according to the Arkansas-based company’s most recent annual report. Target is more reliant on discretionary items like clothing and accessories because less than a quarter of its sales come from food and beverages.

“All these things undermine the Target model, which partly relies on a robust consumer who is comfortable loading their cart with things that they want but do not absolutely need,” Neil Saunders, managing director of research firm GlobalData, said.

Walmart’s size also makes it difficult for its competitor to prevail on price. Walmart operates nearly 5,000 stores in the U.S. and generated annual sales of $611.3 billion in the year ended Jan. 31, 2024. In contrast, Target operates 1,900 stores and generated sales of $107.4 billion in the latest fiscal year.

And even if Target has prices that are lower than or equal to Walmart's on some items, it has always battled a perception of being more expensive, Saunders said.

Their marketing slogans reinforce that perception: Target's is “Expect More. Pay Less.” Walmart's is “Every Day Low Prices.”

Target recorded its lackluster quarterly sales even as it has moved aggressively to cut prices. For the summer, it lowered prices on thousands of necessities ranging from diapers to milk. By the end of December, the company said it will have reduced the prices of over 10,000 items during the year.

Analysts also say that Target has faced stiffer competition from Walmart when it comes to discretionary items like home goods and apparel. Over the past few years, Walmart has added mannequins in its fashion departments and spruced up its fashion selection with more stylish items.

While Target has refreshed its food offerings, Walmart recently launched Bettergoods, its biggest store-label food brand in 20 years in terms of the breadth of items, seeking to appeal to younger customers who are not loyal to grocery brands and want chef-inspired foods that are more affordably priced. The colorfully packaged products include pistachio nut butter and smokey vanilla ground coffee.

Walmart said it's been gaining market share, especially among households with incomes over $100,000. Walmart's online shopping services, which included curbside order pickups, and its paid membership shipping program, Walmart +, also have helped attract wealthier customers.

In response, Target has tried to step up its game. In April, it unveiled a paid membership program called Target Circle 360, which comes with unlimited free same-day delivery for orders over $35 and free two-day shipping for all orders.

Saunders noted that Target has also struggled with operational issues.

Target, like other retailers, had to reroute some merchandise when 45,000 dockworkers went on strike for the first time since 1977. For Walmart, the walkout seemed to cause a hiccup. But the strike took a toll on Target's profits as it struggled with inventory buildup in its warehouses.

Target posted net income of $854 million, or $1.85 per share, in the quarter ended Nov. 2, far short of the $2.30 analysts were looking for, according to FactSet, and down from $971 million, or $2.10 per share, in the year-ago period.

Sales rose to $25.67 billion, up from $25.4 billion last year, but fell shy of Wall Street expectations.

Target said that it now expects its earnings per share to be in the range of $1.85 to $2.45 for its fiscal fourth quarter. That’s below the $2.65 per share expected by analysts polled by FactSet.

The retailer reported that its comparable sales — those from stores and digital channels operating for at least 12 months — rose 0.3% during the third quarter. That’s below the 2% gain posted in the second quarter. The increase in the April-June period reversed months of declines, including a 3.7% drop in the first quarter and a 4.4% decline during the company’s final quarter of 2023.

There were some bright spots. Target said quarterly customer traffic increased 2.4%. Target executives said that translates to 10 million more sales transactions from a year ago. Digital comparable sales also increased 10.8%, reflecting a 20% increase in same-day delivery.

President-elect Donald Trump's campaign promises to impose sweeping tariffs on imports from other countries will create challenges for Target and other retailers. Retailers have warned they would be forced to pass the costs of higher tariffs on to shoppers.

“Right now, there’s a lot of uncertainty as to what will happen, and we’ll use our agility to adjust accordingly, ” Cornell told reporters Tuesday.