[ad_1]
Target warned of weakening consumer demand ahead of the busy holiday season, triggering a 15 per cent drop in its share price in pre-market trading and a sell-off among rival retailers.
“In the latter weeks of the quarter, sales and profit trends softened meaningfully, with guests’ shopping behaviour increasingly impacted by inflation, rising interest rates and economic uncertainty,” chief executive Brian Cornell said as the company reported its latest quarterly earnings on Wednesday.
“This resulted in a third-quarter profit performance well below expectations.”
The Minneapolis-based retailer lowered its guidance for the fourth quarter, predicting a sales decline in the single-digit range, “based on softening sales and profit trends that emerged late in the third quarter and persisted into November,” it said.
The “rapidly evolving consumer environment” would lead it to act “more conservatively” for the rest of 2022.
The warning weighed on shares of retail peers in pre-market trading on Tuesday, with Best Buy, Macy’s and Costco down 4.1 per cent, 2.8 per cent and 2 per cent, respectively. Shares in Walmart, which on Tuesday raised its guidance for the year, were down 1 per cent, while TJX edged 0.2 per cent higher after lifting its full-year outlook on Wednesday.
Target also said on Wednesday that it would implement a cost-cutting plan of $2bn to $3bn over the next three years.
The retailer has struggled with excess inventory this year, necessitating discounts to clear it off the shelves that have weighed on margins and contributed to a series of profit warnings this year.
Target said it now expected a “wide range” for its operating margin rate in the current quarter “centred around” 3 per cent.
Target’s profits fell more than 52 per cent from a year ago to $712mn in the third quarter, while revenue rose 2.4 per cent to $26.5bn. Analysts had expected net income of $971mn on revenue of almost $26bn.
The results stood in contrast to retail peer Walmart, which on Tuesday reported better than expected results, although its chief financial officer David Rainey told analysts “the consumer is stressed.”
[ad_2]
Source link
