Business

Target’s Shares Plunge After Inflation Eats Into Profits


Target’s shares dropped more than 25 percent in trading on Wednesday after it reported quarterly profits that fell far short of analysts’ expectations, hit by inflation and supply issues.

The retailer reported a profit of $1 billion in the three months through April, roughly half of what it generated in the same period a year earlier. The company’s revenue, however, increased by 4 percent in the quarter, to $24.8 billion. Target said it expected sales to continue growing at a similar rate this year but lowered its forecast for profitability, spooking investors.

“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, Target’s chief executive, said in a statement.

Target seemed to encounter many of the same problems as Walmart, which on Tuesday reported that its latest quarterly profits fell 25 percent, pointing to higher prices for fuel and labor, among other things, as a drag on profits. Walmart also missed Wall Street’s expectations for the first time in many years, and saw its share price fall by the most in a day since the 1980s. Its stock continued to fall on Wednesday.

Taken together, the reports from the giant retailers suggest that major companies are still facing supply strains and are struggling to deal with inflation, which is running at its fastest pace in 40 years. Though some companies have managed to pass on rising costs to consumers, bolstering profits, others could find it more difficult to pull off as time goes on and consumers grow weary of rising prices.

“There is a lot of uncertainty moving forward,” Doug McMillon, Walmart’s chief executive, told analysts on a conference call on Tuesday. “Things are very fluid.”



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