The super discounts to reduce the record stocks of some goods have weighed heavily on Target’s accounts. The US retailer reported profits down nearly 90%. Net income for the second quarter was only $ 183 million, or 39 cents per share, for the three-month period ending July 30, down nearly 90 percent from $ 1.82 billion a year earlier. Expectations were disappointing for a less marked drop to 79 cents per share (consensus FactSet). Target had reduced guidance twice in recent months.
Already in the first quarter, Target had reported profits down by 52% compared to the period a year ago.
On Wall Street, Target stock opened -3.7% in the $ 173.51 area.
Stocks knot
Target was forced to reduce prices in recent months to eliminate stocks of clothing, household items and other consumer discretionary items. In June, Target warned that it was canceling orders from suppliers and aggressively cutting prices due to a pronounced shift in spending by Americans in the wake of the surge in inflation.
Revenues instead amounted to 26.04 billion in the quarter, in line with expectations. Comparable in-store sales, on the other hand, increased 1.3% compared to 8.7% growth last year. Online sales increased by 9%.
“While these actions put significant pressure on our short-term profitability, we are confident it was the right long-term decision in support of our customers, our team and our business,” said the CEO of Target, Brian Cornell.
Target’s top executives explained on the conference call with analysts that if they weren’t aggressive in reducing inventory, it would take at least several quarters to get rid of the unwanted merchandise. Cornell said the company is cautiously planning the rest of the year, including the critical holiday period.
Target expects revenue growth for the full year at a low to medium figure. It also provides for an operating margin rate of around 6% in the second half of the year, a marked improvement from 1.2% for the last quarter.
Inflation distorts consumer choices
Walmart, The nation’s largest retailer, reported yesterday that its second-quarter sales and profits increased noting how higher-income shoppers were flocking to discounters to save on groceries, while low-income shoppers were feeling overwhelmed. from rising inflation and were moving from cured meats to hot dogs and canned tuna.