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Target’s profit halves as rising costs hits margins, shares slump 26%

Target’s profit halves as rising costs hits margins, shares slump 26%
Target’s profit halves as rising costs hits margins, shares slump 26%

Target Corp. announced that its quarterly profit was halved and warned of a larger margin impact due to rising petrol and freight costs, pushing the company shares tumbling to 26% indicating that U.S. retailers would remain inflation-proof.

The disappointing results came a day after bigger rival Walmart Inc. lowered its annual profit forecast and its stock had its lowest day since 1987, despite both stores reporting better-than-expected quarterly sales.

In a post-earnings discussion, Target's Chief Executive Brian Cornell claimed that they have a lot of work ahead to return to the profitable level, where they wish to work overdue course of time. Meanwhile, the firm announced that costs are likely to increase by USD 1 billion, exceeding its expectations for the year.

Companies' costs have been high because of pandemic disruptions in transportation networks and the Ukraine situation. The supply-chain issues, according to Target management, will last through 2023. Target now predicts yearly operating margins of roughly 6%, down from an earlier forecast of 8% or more.

The company’s quarterly operating margin fell to 25.7% from 30%, as consumers spent more on food and other basic household essentials rather than high-margin discretionary products like TV sets and apparel given the inflation.

To keep up with the trends, Target announced that it would also reduce the price of some large items like television sets and kitchen appliances to free up shelf space for food and other necessities.

Many corporations are responding to four decades of high inflation by hiking retail prices, but Target has sought to undercut competitors by doing so exclusively for certain categories. Target's revenue increased by 4% to USD 25.17 billion in the first 3 months of 2022 since it kept a big chunk of its products at cheap prices in comparison to its competitors.

Source Credits:

https://www.devdiscourse.com/article/science-environment/2042278-target-warns-of-margin-hit-as-rising-costs-dent-profit-shares-slump-26

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Vinisha Joshi

Vinisha Joshi

Despite graduating with an engineering degree in electronics and communication, Vinisha Joshi chose the road less travelled, and decided to pursue her career in content writing . Currently, she pens down articles for cuereport.com and a few other distinguished news platforms, pertaining to business and finance.