Target Corp.’s quarterly earnings were cut in half, with the company warning of a bigger blow to margins due to rising fuel and shipping costs, with the share falling 21%, a clear indication that investors no longer consider retail businesses unaffected by inflation.
The results come just a day after the biggest competitor Walmart Inc cut its earnings estimates for the year and the stock recorded its biggest drop since 1987.
“We are less profitable than we expected or intended to be,” said Brian Cornell, CEO.
These costs continue to rise almost on a daily basis and there is no indication at the moment that it is going to decrease over time.
The company predicted that the annual operating margin would be around 6% compared to a previous estimate of 8% or higher, and stressed that increased fuel and transportation costs would add $ 1 billion more to annual costs than originally was expected.
The quarterly gross margin fell to 25.7% from 30% as the retailer was forced to sell some products such as kitchen appliances and TVs at reduced prices due to low demand amid pressures on supply chains.
Many companies are facing high inflation by raising the prices of their products, but Target has only tried to do this on certain products.
“Pricing continues to be the last lever we pull. While we do not like the impact on our long-term profitability, we know it is the right thing to do,” he said.
The company’s net profit fell 52% to $ 1.01 billion, while if the exceptions are deducted, the retail company gained $ 2.19 per share, well below estimates of $ 3.92.
Source: Capital
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