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.
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.
