Shares Target Premarket trades Wednesday saw a drop of 24% (NYSE:) after the retailer cut its FY operating margin forecast and announced a worse-than-expected performance.

TGT reported an adjusted first quarter EPS of $2.19. This is down from $3.69 for the previous year and lower than the consensus estimate of $3.06 per shares. The total sales reached $24.83 trillion, an increase of 4% YoY. This is just below the analyst consensus estimate at $24.34 billion.

Comparable sales rose 3.3% over the same period. This beat the predicted growth rate of 1.17%. Comparable digital sales increased 3.2% in Q1, but did not reach the expected growth of 3.67%.

Gross margin was 25.7%, which is compared with 30% for the previous year and 29% consensus. Analysts expected 8.13%. The operating margin was at 5.3%.

For the full fiscal year, Target expects an operating margin income rate “in a range centered around 6%”, down from its previous outlook of +8%.

“Throughout the quarter, we faced unexpectedly high costs, driven by a number of factors, resulting in profitability that came in well below our expectations, and well below where we expect to operate over time,” said Target CEO Brian Cornell.

For its long-term targets, the company still expects “mid-single-digit” revenue growth, and an operating margin rate of “8% or higher over time”. The Q2 operating income margin rates are expected to drop in an equidistant range, centered on the operating margin rate for the first quarter. TGT also said it still expects “low- to mid-single-digit” FY revenue growth.

As a result of earnings, Scot Ciccarelli, Truist Securities analyst, downgraded Target to Buy to Hold and set a $261.00 price target.

John Zolidis, Quo Vadis Capital’s analyst, drew comparisons to Walmart (NYSE:) yesterday.

“Both TGT and WMT beat on the top line but lowered outlooks on unexpected expenses and unfavorable gross margins when comparing to last year’s stimulus-driven spending. These are not encouraging news for retailers who have yet to submit their reports. Some names have been updated more recently and have performed well. HD & LOW didn’t have these issues. A few names that reported with March quarters (TSCO comes to mind) also did not see expenses dramatically exceed guidance,” Zolidis told clients in a note.

BMO analyst Kelly Bania said TGT delivered “solid Q1 comps and traffic growth but significantly weaker GM% and guided full year EBIT margins back to 6% (2019 levels) down from 8%+ prior, suggesting EPS needs to come down by about $4 in our opinion.”

By Senad Karaahmetovic