Discount retailer Target Corp reported third-quarter results that beat Wall Street expectations but forecast a holiday quarter profit that could fall short of estimates, and its shares fell over 5 percent.

Target said early sales results for November showed consumer demand remains tepid, and the company is facing a budding holiday season price war against much larger rival Wal-Mart Stores Inc and online retailer Amazon.com Inc.

Our early sales results for November provide additional justification for being cautious, Target Chief Executive Gregg Steinhafel said on a conference call. Steinhafel said store traffic was moderately higher than a year ago, but transactions were smaller than average, creating pressure on our topline sales.

The company said earnings of $1.12 per share for the fourth quarter were possible, but many factors would need to fall into place to meet or exceed that number. Analysts on average had forecast earnings per share of $1.14, according to Thomson Reuters I/B/E/S.

Target said it is also planning for a modest decline in fourth-quarter same-store sales.

Wal-Mart is slashing prices every week until Christmas, prompting Target to match those discounts on everything from toys to books and DVDs.

Target's aggressive price cuts may expand into other categories as well. Websites claiming to have copies of Target's advertising circular for Black Friday, the day after Thanksgiving, say the retailer will be selling a coffeemaker and a slow cooker for $3 each.

A company spokesman said Target is unable to confirm the accuracy of pricing information posted online.

CONSERVATIVE FORECAST?

Target's profit for the third quarter ended October 31 rose to $436 million, or 58 cents per share, from $369 million, or 49 cents per share, a year earlier.

Analysts, on average, were expecting earnings of 50 cents per share, according to Thomson Reuters I/B/E/S.

With the results, Target broke a streak of eight consecutive declines in quarterly profit.

Sales rose 1.4 percent to $14.79 billion, while sales at stores open at least a year, a key retail gauge known as same-store sales, fell 1.6 percent.

Ralph Cole, senior vice president of research at Ferguson Wellman Capital Management, which owns Target shares, said it made sense for Target to issue a conservative forecast.

It important that they set the bar at a reasonable level and then, like they did this quarter, try to beat that.

But the worry is how much Target, which said it is well-positioned to capture profitable market share, could pressure its own margins in trying to reach its goals.

If you're going to go for market share, what does that mean for profitability during the holiday season? he said.

In its credit card segment, profit increased to $60 million from $35 million, helped by improved portfolio performance.

Target's business faltered in the recession as shoppers stopped splurging on its trendy wares and fell behind making payments on their credit cards.

To get business back on track, Target has slashed inventory, cut costs, set aside funds to cover bad credit card accounts, and begun rolling out P-fresh -- adding an expanded selection of grocery items in its general merchandise stores.

In late morning trade, Target shares were off $2.59 or 5.2 percent to $47.70.

(Reporting by Nicole Maestri, editing by Maureen Bavdek and Gerald E. McCormick)

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