- Target says it sold a lot, but inflation, inventory problems and pressure from employees for higher wages hit profitability hard.
- Market analysts expected otherwise and Wall Street’s reaction is lapidary: Target shares fell 20% in the premarket.
- A similar thing happened a day earlier at Walmart. What is happening in retail?
The American supermarket chain Target will have very tough weeks ahead.
Why? Because Nothing that Wall Street economic analysts anticipated came to pass and the company’s shares plummeted.
Only at the premarket this Wednesday, May 18 They have already lost more than 20% and everything indicates that they will take a long time to recover.
Target’s fiscal first quarter 2022 accounting report is bad, very bad. And to make matters worse, he warns about the “high costs” that are hitting the company’s profits now, something that will be reflected in the coming months.
Something similar happened to Walmart this Tuesday, when missed experts’ forecasts and lowered its earnings and growth expectations.
What about Target’s strategy and actions
Target posted earnings per share of $2.19, which is well below the $3.07 that had been forecast.
Net profit also collapsed to US$1,012 million, from US$2,110 million in the same quarter of 2021.
The only number that is not in red on Tarjet is income. It reported $25.18 billion in the fiscal first quarter ending in April, beating forecasts of $24.51 billion.
However, having meager profits with so much income is, at the same time, bad news.
Target CEO Brian Cornell said that the increase in turnover is accompanied by “unusually high costs”, all in a “scenario of very high inflation” in the United States.
“Although we have had a significant increase in gross income in the period, we had less profitability than we were expecting”, Cornell acknowledged to the surprise of analysts who did not expect such a narrow margin.
Among the main problems, Target mentioned the lack of stock and salary pressure due to salary increases.
Walmart shares also tumbled this week after the company founded by Sam Walton said, like Target, that rising costs had a big impact on profitability.
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