The Target corporation posted a “stunning 52% drop in” profits for its first quarter of 2022: a surprise, considering the long-standing success of the giant corporate retailer.
The TGT stock had its worst day “since 1987” last Wednesday. When reached for comment on the loss in profits, the company cited “higher expenses due to continued supply chain disruptions.”
In addition to ongoing supply chain issues, consumers on a broad scale are spending less due to increased inflation. To further back this point, similar retailers also reported a Q1 loss (Dollar Tree, Costco, and Best Buy among them).
One of Target’s biggest competitors, Walmart, also reported its worst stock day in 35 years last week.
In a press release last week, Target CEO Brian Cornell stated, “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 steep losses are in part due to inflation. As prices rise, consumers are not only cutting back on the purchase of basic goods, but high-ticket items are also off the list. These include TVs, interior decor and exercise equipment, to name a few. This lowers the value of the items while trying to get them off shelves and warehouses.
To compound losses, Target has reported an increase in pay for hourly workers as a response to the Great Resignation post-pandemic. According to NPR, Target hourly employees can now expect to earn anywhere from $15 to $24 an hour.
These factors added up and contributed to Target’s losses for Q1 of 2022. These all cut into the profit earnings, and Target must now reassess certain expenditures to turn a profit in Q2. Target was one of the most profitable companies during the pandemic, and now its profits are about half of what they were a year ago.
“We did not anticipate the rapid shifts we’ve seen over the last 60 days,” Brian Cornell stated.
Scott Mushkin, a retail analyst and founder of R5 Capital, stated, “It’s clear that the market is saying we are going to have a really significant slowdown in consumer spending. I’ve done this [for] 30 years and I’ve never experienced anything like we experienced [the day the stocks fell].”