Target shares fall on the heels of a disappointing earnings report.
The major box retailer reported that Q1 changed its earnings per $ 2.19 per share which has fallen short of analysts' $ 3.06. Quarterly revenues totaled $ 25.17 billion compared to the expected $ 24.49 billion.
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Targeted shares fell by more than 27.49% on Wednesday afternoon.
Read: Dow Jones Futures Fall After Bullish Market Rally; Target Crashes On Big Earnings Miss
Target said its weak Q1 results are the result of higher fuel and transportation costs and more inventory in its supply chain. The target saw an unexpected drop in sales in categories such as home, electronics, sports goods and clothing as consumers spend more time on all the important categories like food and drink.
"We have seen a much higher price than expected and travel costs and a much bigger change in our sales mix than we had expected," said chief executive Brian Cornell. "This has resulted in a larger number, most of which have been in large areas, which adds to the complexity of the already expanded series."
As a result, the company had to pursue short-term storage options to control inventory overload.
Target results highlight the general consumer shift from select categories to optional options such as groceries, given the high inflation rate. Consumer prices rose 8.3% in April compared to last year, according to a monthly report by the Bureau of Labor Statistics. Specifically, the food index rose by 9.4%, marking a dramatic increase of 12 months from the end of April 1981.
"Some of these changes are the result of changes in the wider consumer economy that has seen people withdraw from consumer goods such as homewares and electronics as they balance their budgets and make spending normally after two years of epidemic disruption," said GlobalData management. director Neil Saunders in a statement.
On Wednesday, Walmart reported a disappointing wage report in a similar way due to rising wage costs and fuel costs in the supply chain, as well as declining regular asset sales due to inflation. With retail items such as food and gas high, Walmart said consumers spend less money on standard retail categories such as clothing, which has contributed to higher inventory levels than they had hoped for, such as Target.
Walmart said it plans to reimburse prices for certain items, such as clothing, in order to maintain the flow of goods. Target also said it would introduce higher prices.
Despite the disappointing quarter, Target has reaffirmed its direction for the 2022 financial year and anticipates low and medium-digit revenue growth.
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