Target's underwhelming third quarter update was hardly helped by rousing results from rival and retail titan Walmart as the retailer admitted to a challenging year.

The retailer’s downbeat earnings report, which included lower profit and larger inventory, fell far short of Wall Street’s expectations.

Walmart is heading into the official start of the holiday shopping season with strong tailwinds after ratcheting up better-than-expected fiscal third-quarter sales in many items including toys, home goods and groceries. The robust results, announced Tuesday, underscore how Walmart's comparatively low prices have become a powerful draw for shoppers seeking…