Wall Street laid into Target on Wednesday after the company failed to deliver on quarterly profits.
The Minneapolis-based big-box retailer revealed earnings, increasing top-line revenues but falling short on profits due to continued pandemic-related headwinds. Shares plunged more than 22 percent during Wednesday’s pre-market hours as a result.
“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,” Brian Cornell, chairman and chief executive officer of Target Corp., said in a statement. “Despite these near-term challenges, our team remains passionately dedicated to our guests and serving their needs, giving us continued confidence in our long-term financial algorithm, which anticipates mid-single digit revenue growth and an operating margin rate of 8 percent or higher over time.”
Total revenues for the three-month period ending April 30, were $25.1 billion, up from $24.1 billion a year ago. Comparable sales grew 3.3 percent during the quarter, year-over-year, on top of 22.9 percent growth last year, while guest traffic rose 3.9 percent during the quarter, thanks to strength in food and beverage, beauty and household essentials.
Still, excess inventory and higher freight and transportation costs lead to reduced earnings per share. Target’s first quarter GAAP earnings per share fell 48.2 percent to $2.16, down from $4.17 the same time last year. The company logged just over $1 billion in profits, as a result, down from $2.09 billion during 2021’s first quarter.
Target’s results mimicked the trends big-box rival Walmart revealed Tuesday during its quarterly earnings. Like Target, Walmart executives said the company was hit by higher-than-expected freight costs, excess inventory and reduced spending on high-margin categories, like apparel, all of which hurt bottom-line profits.
But Cornell remains bullish on Target’s future. “Guests continue to depend on Target for our broad and affordable product assortment,” he said. “Our first-quarter results mark Target’s 20th-consecutive quarter of sales growth.”
The firm affirmed its full fiscal year 2022 outlook of revenue growth in the low to mid-single digit range.
Target ended the quarter with 1,933 stores, in addition to its e-commerce business, $1.1 billion in cash and cash equivalents and roughly $13.3 billion in long-term debt.
Shares of Target, which closed down 1.41 percent Tuesday to $215.28 are up 4.2 percent, year-over-year.
