NewslettersSign inAPP
spainSPAINargentinaARGENTINAchileCHILEcolombiaCOLOMBIAusaUSAmexicoMEXICOperuPERUlatin usaLATIN USAamericaAMERICA

FINANCIAL NEWS

Inflation: Target and Walmart profits drop and stocks plunge after posting financial reports

Retail giants reported a huge decline in their profits for the first quarter of 2022, sparking significant losses in their stock market value.

Update:
Target and Walmart profits drop and stock valuations plunge
KAMIL KRZACZYNSKIREUTERS

Some of the biggest retailers in the United States have recorded severely disappointing figures for the first quarter of 2022, causing a slump in their stock market valuations.

Retail giant Target reported a shocking 52% fall in profits for the first quarter of this year, blaming supply chain disruption and the fall in consumers’ buying power for the decline. On Wednesday alone shares in Target fell by 25%, the company’s worst day on the stock market since 1987.

Similarly Walmart’s stock recorded its worst day in 35 years earlier this week after posting a poor earnings report. The company’s financial outlook also worsened due to the increase cost of labour and shipping.

Target CEO Brian Cornell released a statement on Wednesday explaining: “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.”

Inflation blamed for poor earnings reports

In May the annual inflation rate remained close to a 40-year high with sustained price rises leaving many people unable to cover the cost of essentials. With consumers’ buying power taking a real hit, shoppers appear less willing to fork out on major purchases.

Cornell said that this was to blame for the “lower-than-expected sales in discretionary categories,” and added that Target shoppers are feeling the effects of the “high and persistent inflation they’ve been experiencing, particularly in food and energy.”

It is not just Target and Walmart shoppers who are suffering from the high rate of inflation and it is hurting profits across the retail sector. In recent years the retail sector has been helped by stimulus checks and other forms of federal financial relief, boosting consumers’ spending power.

High gas prices hit retail sector hard

Along with the sky-high rate of inflation, fuel prices have also soared in recent months. On Friday the average price of a gallon of gasoline reached $4.593, breaking the all-time US record, while diesel sat at $5.570 per gallon.

Diesel is the fuel most commonly used for industry transportation and the sharp rise has had sharp consequences for the retail sector. The average price of a gallon of diesel is now around $2.40 more than it was at the same point last year.

As a result, Cornell has warned that Target’s freight costs for 2022 are expected to be around $1 billion more than they were last year. Walmart, too, have blamed the soaring fuel prices for their weak financial showing.

Walmart CEO Douglas McMillon told Tuesday’s earnings call: “Fuel ran over $160 million higher for the quarter in the US than we forecasted.”

Rules

To be able to comment you must be registered and logged in. Forgot password?