Target (NYSE:TGT) saw its shares drop over 21% yesterday after reporting third-quarter earnings that significantly missed expectations and issuing disappointing guidance for the full fiscal year.

The retailer posted adjusted earnings per share of $1.85 for the quarter, falling well short of the Wall Street analyst estimate of $2.30. Revenue came in at $25.67 billion, narrowly missing the $25.87 billion estimate. Comparable sales rose by a modest 0.3% year-over-year, supported by a 2.4% increase in traffic but offset by lower average transaction values.

Full-year guidance added to investor concerns, with Target projecting fiscal 2025 EPS between $8.30 and $8.90, far below the $9.52 analysts had anticipated. For the fourth quarter, the company forecasted approximately flat comparable sales and adjusted EPS in the range of $1.85 to $2.45.

Despite pockets of strength, including nearly 11% growth in digital sales and gains in beauty and high-frequency categories, Target faced significant cost pressures. Higher digital fulfillment and supply chain expenses, linked to elevated inventory levels and new facilities, weighed on margins. The gross margin rate declined slightly to 27.2%, while the operating margin fell to 4.6% from 5.2% a year earlier.