Target Corporation (NYSE: TGT) became the latest casualty of accelerating inflation taking a toll on the economy. The grocery chain reported its financials for fiscal Q1 2022 ended April 30, 2022, highlighting a revenue of US$25.17 billion, a marginal increase from Q1 2021’s US$24.20 billion.
While the quarterly topline figure beat the US$24.37 billion street estimate, the firm recorded US$2.16 earnings per diluted share for the quarter, wildly missing the US$3.07 earnings per share estimate. The bottomline figure is also a drop from last year’s US$4.17 earnings per share.
“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,” said CEO Brian Cornell.
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Following the release, the company’s shares plummet by as much as 25%.
The lower earnings stem mainly from a higher cost of sales at US$18.46 billion from last year’s US$16.72 billion. Operating margin also contracted to 5.3% this quarter coming from last year’s 9.8%.
For Q2 2022, the company is expecting the operating margin not to significantly veer away from Q1’s 5.3%. This is far guidance from the street estimate of 9.4%. For full year, the firm is also guiding the operating margin to be around 6%.
Net earnings for the quarter ended at US$1.01 billion, also down from last year’s US$2.10 billion.
The firm ended the quarter with a cash balance of US$1.11 billion coming from a starting balance of US$5.91 billion. The outflow was mainly driven by the accelerated share repurchase arrangement of US$2.75 billion of common stock. The company also said that it paid around US$424 million in dividends during the quarter, a decline from last year’s US$340 million.
This puts the balance of the current assets at US$17.95 billion while current liabilities ended at US$20.72 billion.
In the earnings call, the management said “fuel and freight costs will be US$1 billion higher this year” than expected, with little sign of their easing throughout 2022.
Target last traded at US$162.26 on the NYSE, down 24.19%.
Information for this briefing was found via Edgar and the companies mentioned. The author has no securities or affiliations related to this organization unless otherwise mentioned. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
