Target profits plunge 90% as inflation-weary shoppers pull back

But Target reported that its price cuts did little good: It ended the quarter with 1.5% more inventory than three months ago and 36% more inventory than a year ago.

The company said it had reduced the amount of preferred items it kept in warehouses, but Target noted that sales of those items “put significant pressure on our near-term profitability.”

Shares target (DGT) The report fell 2% in premarket trade.

Revenue falls, again

Target’s quarterly net income fell to $183 million, down significantly from $1.8 billion in the same period a year ago.

Also, its adjusted earnings of 39 cents per share were well below the 72 cents forecast by analysts polled by Refinitiv. Sales of $26 billion were slightly higher than a year ago and roughly in line with forecasts.

After seven quarters of strong profit growth, this marks the second straight quarter Falling revenue At Target, the decline was more than a 40% drop in the previous quarter.
Consumer withdrawal is one of the factors driving the demand for preferred products Fear of recessionConsumer spending is responsible for nearly three-quarters of the country’s economic activity.
Target’s disappointing results came in contrast to much stronger results at its larger competitor Walmart (WMT), reported profits on Tuesday that were down slightly from a year earlier. Walmart expects an 8% to 10% drop in annual revenue, though this is a narrower drop than previously predicted.

‘Feeling the impact of inflation’

CEO Brian Cornell told investors Wednesday that the environment for Target and similar retailers remains “challenging.” But Target is seeing “an encouraging start to the return to school,” he said.

See also  Facing off against big tech, the FTC sued to block the Meta virtual reality deal

He believes the revenue hit in the latest quarter should not be repeated: “The top story: Much of the financial impact of these cargo operations is now behind us.”

However, it is a tough time being a retailer due to the unpredictability of consumer spending activity and the effect of macro factors such as inflation.

Target “is hearing from our guests that they still have spending power, but they are increasingly feeling the impact of inflation,” said Christina Hennington, the company’s chief development officer. she said Falling gas prices However, the last two months have been “encouraging”.

Target’s heavy reliance on Walmart vs. Choice

These trends hit Target harder than rival Walmart, which derives a larger share of its sales and profits from essentials like groceries. Targeting is usually highly dependent on those preferred items.

Walmart has a reputation for offering the lowest prices among big-box retailers in many categories — but in its earnings report on Tuesday, the company said sales to middle- and upper-income shoppers increased.

Leave a Reply

Your email address will not be published.