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Target shares dive on earnings outlook, price cut plans | Reuters

Target Corp (TGT.N) said on Tuesday it will rely more on low prices to compete with rivals like Wal-Mart and Amazon, admitted many of its stores needed freshening up, and told Wall Street its sales and profit estimates for 2017 are too high.

Shares of the retailer plunged to 2-1/2-year lows in heavy trading. Many of its rivals fell, too, including deep discount chains that will now face tougher competition on prices. For investors, the news was a shocking reminder that U.S. retailing remains a cutthroat business.

TARGETING GROCERY SHOPPERS?

One of the first areas where prices will come down at Target is food, the company said. Food and pet supplies account for about a fifth of Target sales, according to its annual report.

On Monday, Reuters reported Wal-Mart launched a new front in U.S. price wars with a test in 1,200 stores to lower grocery prices. [nL2N1GC03L]

With Wal-Mart and Amazon already facing off on price, including in the grocery aisle, Target is in an uncomfortable middle ground. And where Wal-Mart has established itself as the nation’s largest grocer, Target’s foray into food has been less successful.

“Target is neither a full-line grocer nor a player with lots of niche specialty products; it is neither a high-end player, nor a price-focused discounter,” said Neil Saunders, managing director of GlobalData Retail.

Target’s grocery offerings are “confusing,” he said.

Two years ago, bigger rival Wal-Mart aggressively cut prices across the board and boosted its online presence. Target could not act then due to costs related to a massive data breach and its decision to pull out of Canada.

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Target shares dive on earnings outlook, price cut plans | Reuters.