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Target (TGT) Sinks 22% on Poor Q1 Earnings, Following Walmart

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Updated 18 May 2022

Key points:

  • Following Walmart, Target falls short of its Q1 earnings expectations
  • EPS was pegged at $2.19 on a $3.07 consensus, revenue came in at $25.17B on a $24.5B consensus
  • TGT shares fell around 24% in Wednesday premarket trading

Over the last 2 days, 3 of the US’s largest retailers reported a mixed bag of earnings, painting a vivid image of the current economic reality. Firstly, Walmart missed on its Q1 consensus despite the general narrative suggesting the company could effectively weather supply chain limitations – yet the company struggled with costly inventory issues. Secondly, Home Depot secured a surprise Q1 beat, defying expected costs and delays with resilient consumer demand and a strong continuation of pandemic DIY trends. Today was the turn of variety specialist Target (NYSE: TGT), and it seems the company has followed on the trail of Walmart; disappointing investors on its Q1 earnings.

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Target announced first-quarter earnings pegged at $2.19, falling almost $1 short of the $3.07 expected by analysts. Delivering on top line growth, Target posted revenue of $25.17B against a consensus of $24.5B. Although consumers are still providing the company with consistent top line growth, rising costs are becoming an increasingly prominent feature for the bottom line.

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Target noted pricier freight costs, higher markdowns and lower-than-expected sales from more luxury items such as TV’s and bicycles; inflation is niggling away the everyday shopping list, meaning necessities take front and center stage. 

TGT shares are currently trading down 24% in Wednesday premarket, erasing gains from more than a year as price retreats back to levels seen in October 2020. It seems that all retailers are feeling the bruteness of macro forces on bottom line growth, aside from Home Depot who has luckily relied on sturdy spending habits. Lowes also reported a mixed first-quarter as uncertainty continues to grip global industry.