Target shares were forecast to open nearly 14% lower, dragging down other retailers. Macy's Inc., Costco, Best Buy and Dollar Tree were set to fall between 2% and 4%.

Target's larger competitor Walmart slipped nearly 2%, a day after lifting its annual sales and profit forecast as demand for groceries held up despite higher prices.

"After so many emergency rate hikes it's now affecting the consumer a little bit and I think it's evidenced in Target today," said Thomas Hayes, managing member at Great Hill Capital LLC in New York.

Target, which said third-quarter profit had halved, warned of "dramatic changes" in consumer behavior, leading to a drop in demand for everything from toys to home furnishings.

U.S. stock index futures pared gains after Target's update, which was reminiscent of its quarterly report in August when it posted a bigger-than-expected 90% fall in earnings.

With annual inflation running at 7.7% in October and high interest rates, shoppers are skimping on discretionary spending, a gloomy prospect for a sector that relies on year-end shopping for a large portion of its annual sales.

U.S. Commerce Department data due out later in the day is expected to show U.S. retail sales rose 1% in October after no growth in September.

Target shares lost 22.7% of their value since the start of the year until Tuesday, while Walmart edged up 1.9%. The broader S&P 500 retailing index has shed about 29.4% in the same period.