The American retail giant Target suffered a brutal stock sell-off after its latest earnings report failed to impress shareholders. The sell-off triggered a broader response in the stock market, with big-box retailers leading the charge downward.
Target released its first-quarter earnings report on Wednesday. The company clocked a 48.2% decline in profit compared to the same quarter in 2021:
“Throughout the quarter, we faced unexpectedly high costs, driven by a number of factors, resulting in profitability that came in well below our expectations, and well below where we expect to operate over time.”
The report blamed the dismal profit margins on supply chain disruptions, increases in employee wages, and “lower-than-expected sales in discretionary categories.”
Even though the company’s overall sales were up 4% compared to 2021, shareholders punished the retailer. Target saw its worst day on Wall Street since 1987. Share prices plunged roughly 25%.
By no means did Target suffer alone this week. Walmart released its earnings report Tuesday, May 17, with its “net income” dropping about 25% compared to the previous year.
Shareholders reacted by driving down Walmart’s stock by 11.4%.
Both retailers reported a similar dynamic at play: big-ticket, non-essential items like flatscreen TVs and exercise equipment languished on shelves and in warehouses. Consumers focused their spending on essentials like food, beverages, and bath and beauty products.
This quarter, T.J. Maxx, Marshalls, and Ross stores also missed their earnings goals and had to lower their outlooks for the year.
Discount retailers took a shellacking as well; Big Lots and Dollar Tree lost 12% and 16% in stock value, respectively.
The downward plunge among all retailers reverberated throughout the stock market, wiping out the previous day’s surprise rally and making for a volatile week in finance.
If the retailers’ quarterly reports are any indication, inflation will continue to hammer American businesses along with consumers.
