Retail giant Target has seen its quarterly profits decline by more than 50% due to rising operational costs.
Target reported its Q1 earnings report on Wednesday. The company’s numbers were below what Wall Street analysts had expected.
The retail giant reported a profit of $1.01 in the first quarter of 2022. This represents a 52% decline from the previous quarter and is below what Wall Street analysts had estimated.
The earnings per share was $2.19, which is below the $3.29 Wall Street analysts had predicted.
The shares of Target are now down by 21% during Wednesday’s pre-market trading session, a clear sign that investors no longer see major U.S. retailers staying immune to inflation.
Target added that its profits in the current quarter could be negatively affected due to the rising inflation levels in the United States. Target Chief Executive Brian Cornell said;
“We were less profitable than we expected to be or intend to be over time. These (costs) continue to grow almost on a daily basis and there is no sign right now…that it is going to abate over time.”
The retail giant predicted its annual operating margins to be around 6% compared to a prior forecast of 8% or more. Target said the rising fuel and freight expenses will result in a $1 billion addition to their expenses this year.
Target’s finance chief Michael Fiddelke said;
“(Pricing) continues to be the last lever we pull,” finance chief Michael Fiddelke said. “While we don’t like the impact on our profitability in the short term, we know it is the right thing to do.”
Target revealed that its quarterly gross margin declined to 25.7% from 30%. This was because Target was forced to sell some products such as kitchen appliances and televisions at discounted prices because of the weak demand amid supply-chain pressures.