NEW YORK (AP) – Target took a big hit from higher costs during the first quarter despite brisk sales.
Profits for major retailers came under pressure from both surging inflation and stubborn clogs in the global supply chain.
Target’s net income fell roughly 52 per cent from a year ago to USD1.01 billion, or USD2.16 per share, in the quarter that ended April 30. Per-share earnings adjusted for one time costs were USD2.19, far from Wall Street projections of USD3.07 a share expected by industry analysts polled by FactSet.
That is also below last year’s first quarter profit of USD2.09 billion.
“Throughout the quarter, 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,” CEO Brian Cornell said in a prepared statement.
Target’s report follows quarterly results from Walmart on Tuesday and there were many similarities between the two, including an early sell-off of stock. Shares of Target Corp plunged 22 per cent before the opening bell yesterday.
Revenue rose four per cent to USD24.83 billon in the quarter, a little better than expected.
Sales at Target stores open at least a year increased 3.4 per cent during the latest quarter. It posted an 18 per cent increase in the same quarter last year. Online sales increased 3.2 per cent, following growth of 50.2 per cent. Same-day services including picking up online orders curbside increased eight per cent this year. Over 95 per cent of Target’s first quarter sales were fulfilled by its stores.
Sales growth was driven by items that shoppers frequently purchase like food and beverages, beauty and household essentials.
During a media call with reporters on Tuesday, executives with the Minneapolis company said that customers remain financially healthy but they are switching up their buying as they become more social. For example, instead of buying TVs, they’re buying luggage as they travel more.