target Corp on Wednesday reported a larger-than-expected 90% drop in quarterly profit and missed comparable sales estimates as it had to lure inflation-hit shoppers with deep discounts on clothing, electronics and household items. home.
A series of US retailers have issued profit warnings in recent weeks, as consumers, pressured by rising prices for all kinds of goods, have cut spending on non-essential items.
Because Target relies more on discretionary categories, it is more prone than its rivals to hit hard times, unlike Walmart Inc., where groceries and packaged goods have more shelf space.
Walmart beat earnings estimates, as its low- and middle-income shopper base flocked to its stores for grocery deals. Minneapolis-based Target’s operating margin fell to 1.2% in the second quarter, from 9.8% a year earlier, due to costs related to removing excess merchandise.
However, Target reiterated that it would return to an annual operating margin rate of around 6%.
The vast majority of the costs to get our inventory to where we wanted are behind us…we are well positioned to see better earnings performance in the second half of the year,” CFO Michael Fiddelke told a news conference. press.
Target comparable sales in the second quarter rose 2.6%, below analyst estimates for a 3.3% increase, according to IBES data from Refinitiv.
The company reported quarterly earnings of $183 million, or 39 cents a share, less than estimates of 72 cents.
Despite heavy discounting, inventories increased 1.6% to $15.3 billion at the end of the quarter, from the prior period.
