Shares of Target Corp. /zigman2/quotes/207799045/composite TGT -2.56% slumped 2.3% in premarket trading Wednesday, after the discount retailer reported fiscal second-quarter profit that fell well short of expectations, as higher markdown rates led to lower gross margins, but revenue that topped forecasts. Net income for the quarter to July 30 sank to $183 million, or 39 cents a share, from $1.82 billion, or $3.65 a share, in the year-ago period. Excluding nonrecurring items, adjusted earnings per share of 39 cents missed the FactSet EPS consensus of 79 cents. Gross margin contracted to 21.5% from 30.4%. "This year's gross margin rate reflected higher markdown rates, driven primarily by inventory impairments and actions taken to address lower-than-expected sales in discretionary categories, as well as higher merchandise, inventory shrink, and freight costs," the company said. Higher pay for workers, increased headcount in distribution centers and costs of managing excess inventory also pressured margins. Total revenue grew 3.5% to $26.04 billion, above the FactSet consensus of $26.03 billion, while same-store sales growth of 2.6% was below expectations for a 2.8% rise. The company affirmed its fiscal 2022 revenue growth guidance in the low- to mid-single digit percentage range, while the current FactSet consensus of $109.83 billion implies 3.6% growth. The stock has dropped 16.3% over the past three months through Tuesday, while shares of rival Walmart Inc. /zigman2/quotes/207374728/composite WMT +0.96% have gained 6.1% and the S&P 500 /zigman2/quotes/210599714/realtime SPX -1.03% has advanced 5.3%.