Target raised its holiday-quarter comparable sales forecast on Thursday, buoyed by robust shopper demand for clothing, toys and beauty products during November and December, but profit margin concerns sent its shares down nearly 3%.

Discounts and sales events have remained a significant sales driver, as consumers emerge from a more than two-year stretch of high inflation. It’s unclear how much those deals will cut into Target’s and other retailers’ profit margins, and whether sales will keep improving if promotions fade away.

Consumers spent $994.1 billion in the last two months of 2024, according to the National Retail Federation, surpassing the trade group's forecast. “Core” retail sales—everything but gas, car and restaurant purchases—rose 4% from the 2023 holiday season.

Target leaned in heavily toward promotions and sales during the holidays, a strategy that seems to have left it in the middle of the pack of retailers for the season. The Minneapolis-based retailer said Thursday its comparable sales rose about 2%,

Target anticipates 1.5% growth in Q4 comparable sales and maintains its EPS guidance of between $1.85 and $2.45.