(MENAFN- Trend News Agency)
Target Corp's quarterly profit halved and it warned of a bigger
margin hit on Wednesday due to rising fuel and freight costs, in a
clear sign there would be no immediate relief for U.S. retailers
from surging inflation, Trend reports with reference to Reuters .
Shares tumbled 24% following the bleak results that came a day
after larger rival Walmart Inc cut its annual profit view and its
shares logged their worst day since 1987, though both retailers
clocked better-than-expected quarterly sales.
'We were less profitable than we expected to be or intend to be
over time,' Target Chief Executive Brian Cornell said.
'These (costs) continue to grow almost on a daily basis and
there is no sign right now...that it is going to abate over
Rising fuel and freight expenses will add nearly $1 billion more
than originally expected in annual expenses, Target said, as
pandemic disruptions to shipping channels and the crisis in Ukraine
keep costs for companies elevated.
Target's quarterly gross margin dipped to 25.7% from 30%, also
due to excess inventory resulting in higher discounts. Demand for
costlier items such as televisions and kitchen appliances was also
waning, the company said.
'Target's print looks remarkably similar to Walmart's ... But
this is accompanied by much worse margins due to the now all too
common refrain of higher supply-chain costs, which are not yet
being fully passed through to consumers,' D.A. Davidson analyst
Michael Baker said.
'This dynamic, which is likely to persist, makes it painful to
own (shares of) retailers in the current environment.'
The company predicted annual operating margins to be around 6%
compared to a prior forecast of 8% or higher. Its first-quarter net
profit fell to $1.01 billion. Its adjusted profit of $2.19 per
share missed expectations of $3.92.
Still revenue rose 4% to $25.17 billion, helped by its strategy
to undercut peers by keeping a large section of its products
affordable even at the cost of some short-term profitability.
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