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Target (TGT) stock drops 25% as inflation drags Q1 earnings down


  • Target (NYSE:TGT) announced its first quarter financial results this morning
  • The retailer reported earnings well below expectations and growth slowdowns across the board
  • TGT is down more than 25% at the time of writing

Source: jejim / Shutterstock.com

Target (NYSE:TGT) shares plunge today after the retailer reported surprisingly weak first-quarter earnings this morning. TGT is down almost 25% at the time of writing, reversing much of yesterday’s gains.

This morning, the discount retailer offered investors financial results for its fiscal first quarter, which ended April 30. The company reported operating profit of $1.3 billion, down 43% from the same quarter last year. Target also posted earnings per share (EPS) of $2.16, down 48% year-over-year (YOY) and well below analysts’ expectations. Its adjusted EPS of $2.19 was also well below consensus estimates of $3.07. Target faced growth slowdowns in almost every area this quarter, including a “well below expectations” operating margin rate.

All was not bad, however. The company reported net profit slightly higher than last year and managed to beat analysts’ revenue forecast, announcing $25.17 billion versus $24.48 billion expected.

Target also adjusted its full-year 2022 operating profit margin rate to 6% from 8% previously. However, it maintains its expectation of low to mid-single-digit revenue percentage growth this year.

TGT Stock eyes biggest one-day drop since 1987 on earnings

The company cited rising costs as the main detriment to its profitability, much like its main competitor walmart (NYSE:WMT), which also saw its share price drop due to its recent missed results. Specifically, Target has faced higher freight and transportation costs in the past quarter. Additionally, the company reported unexpected slowdowns in discretionary spending, likely a consequence of high inflation in the country for a decade.

Brian Cornell, CEO of Target, commented on the challenges of the quarter:

“Throughout the quarter, we faced surprisingly high costs, driven by a number of factors, which resulted in profitability well below our expectations and well below what we expect to operate. over time.Despite these short-term challenges, our team remains passionately dedicated to our clients and serving their needs, giving us continued confidence in our long-term financial algorithm, which anticipates single-digit and single-digit revenue growth. operating margin rate of 8% or higher over time.

Despite rising costs, Target tried to reassure customers and investors that it would try to avoid raising costs in order to bolster profits. Target joins an ever-growing list of companies facing sometimes brutal profit losses lately.

Like other companies, investors have expressed disappointment over this latest shortfall with their portfolio. The target stock is down more than 25% at the time of writing. If the losses continue throughout the day, it will be the biggest single-day drop for the company since 1987.

As of the date of publication, Shrey Dua does not hold (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

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