Target reported its first quarter earning and it was far from the mark estimated by Wall Street analysts. There was a huge drop of 52 percent in profits. After the reports, the share price of the retailer fell by 27 percent in late afternoon trading, on Wednesday. This is close to its worst day in the past three and a half decades. The deep plunge had a domino effect on the market which saw major indexes fall.
The expected earnings per share (EPS) in USD was 3.06 while the reported EPS by Target was 2.19. This was a fall by -28.53 percent. The expected revenue in USD was 2.45TCr and the reported revenue was 2.52 TCr. It was up by 2.81 percent and was unexpected.
The American big box department store said that supply chain disruptions led to higher expenses. The company also said soaring inflation had led to a change in customer behavior. Customers were purchasing essential items and there was a slump in sales of nonessential purchases.
On Wednesday, in an earnings press release, Brian Cornell, the CEO of Target said that they had faced “unexpected high costs” due to several factors that resulted in “profitability that came in well below” their “expectations and well below where” they “expect to operate over time.”
Last year, sales had been boosted by the stimulus package offered by the government. There is no federal boost in 2022 and this has resulted in consumers spending money only on essential food and beverage items.
Target said that overall sales had increased by four percent, which was above analysts’ forecasts. The Minneapolis, Minnesota headquartered company lost out on sales of “discretionary categories” included expensive products such as televisions and exercise equipment. Warehouses were filled with excess inventory, leading to a write down in the value of such items.
The role of inflation was also a concern for shoppers who visit Target, according to CEO, Cornell who mentioned in while on a conference call with analysts.
Other retailers including Walmart, T.J. Maxx and TJX (owner of Marshals) said that sales were below estimates. These retailers have also been grappling with higher compensation for employees at stores and warehouses.
(Photo/Credit:hapabapa )
