NEW YORK (AP) — Target took a big hit from higher costs during the first quarter despite brisk sales.
Profits for major retailers has come under pressure from both surging inflation and stubborn clogs in the global supply chain.
Target's net income fell roughly 52% from a year ago to $1.01 billion, or $2.16 per share, in the quarter that ended April 30. Per-share earnings adjusted for one time costs were $2.19, far from Wall Street projections of $3.07 a share expected by industry analysts polled by FactSet.
That is also below last year's first quarter profit of $2.09 billion.
"Throughout the quarter, we faced unexpectedly high costs, driven by a number of factors, resulting in profitability that came in well below our expectations, and well below where we expect to operate over time," CEO Brian Cornell said in a prepared statement.
Things have changed significantly from the environment the company was experiencing just 13 weeks ago, Cornell said, and the company did not project the significant cost increases in freight and transportation.
Those costs will be $1 billion higher this year than the company had anticipated, and Target does not expect those costs to ease this year.
Target's report follows quarterly results from Walmart Tuesday and there were many similarities between the two, including an early sell-off of stock. Shares of Target Corp. plunged 22% before the opening bell Wednesday.
Revenue rose 4% to $24.83 billon in the quarter, a little better than expected.
Sales at Target stores open at least a year increased 3.4% during the latest quarter. It posted an 18% increase in the same quarter last year. Online sales increased 3.2%, following growth of 50.2%. Same-day services including picking up online orders curbside increased 8% this year. More than 95% of Target's first quarter sales were fulfilled by its stores.
Sales growth was driven by items that shoppers frequently purchase like food and beverages, beauty and household essentials.
During a media call with reporters on Tuesday, executives with the Minneapolis company said that customers remain financially healthy and that the pattern of spending is returning to something more similar to before the pandemic.
Americans are buying fewer TVs, bicycles and kitchen appliances than they did during the two years of the pandemic. Those sales have shifted to luggage, for example as people begin traveling again. That unexpectedly rapid shift led to higher markdowns and an increase of bulky items that are not selling as quickly as Target had expected.
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