Target Earnings Plunge 50% On Cost Pressures and Supply Disruptions

Scott Peters
18 May, 2022
New York City

Target Corp said sales in the fiscal first quarter ending in April increased 4% from a year ago to $24.8 billion and net income declined 52% to $1.0 billion. 

Diluted earnings per share in the quarter fell 48% to $2.16 from $4.17 a year ago. 

Comparable sales including sales and e-commerce in the quarter rose 3.3% after rising 22.9% a year ago and traffic in the quarter rose 3.9%. 

Comparable store sales increased 3.4% in the quarter after rising 18% last year. 

Digital comparable sales growth slowed to 3% after surging 50% in the period a year ago. 

Consumers focused on basic household items, food and beverages, and beauty essential needs as inflation and rising gas prices limited budgets for discretionary items. 

Operating income plunged 43.3% from a year ago to $1.3 billion largely on a lower gross margin rate.  

Supply chain disruptions led to some products arriving too late and others reaching warehouses too early forcing the company to larger than usual markdowns. 

Operating income margin in the quarter fell to 5.3% from 9.8% in the period a year ago. 

Higher freight rates also added to the inventory schedule havoc caused by supply chain disruptions. 

Guidance & Outlook 

For the second quarter, the retailer expected operating margin rate to fluctuate in a wide range centered around the first quarter's rate of 5.3% and around 6% for the full-year. 

Full-year 2022 sales are expected to increase in low- to mid-single digits. 

Company & Stock 

Target Corp is headquartered in Minneapolis, Minnesota and operates 1,931 stores and employs 400,000 people. 

Target stock plunged 27.7% to $155.53 after the company released earnings today and for the year declined 32.8%.