Target warns of soft holiday quarter as profit tumbles and sales slow
Target’s profit fell by around 50% in its fiscal third quarter as it cleared through unwanted inventory and sales slowed heading into the holidays, prompting the company to lower its expectations for retailers’ most important time of year.
The company also said Wednesday it plans to cut up to $3 billion in total costs over the next three years, citing the need to become more efficient after two years of dramatic sales gains. The retailer’s revenue has grown by about 40% during the Covid pandemic.
Target echoed many of the same themes as its competitor Walmart. Consumers are feeling strained by higher prices for groceries, housing and other necessities. They are buying fewer full-priced items and holding out for promotions instead. To stretch their dollars, they are choosing smaller items, value packs or the retailers’ own, less-expensive brands.
People are spending less on discretionary merchandise, too. Walmart on Tuesday also spoke of a pullback in spending on apparel, electronics and similar items. But the discounter beat Wall Street’s expectations as it attracted shoppers with its low-priced groceries.
Raising fears about a recession
The 2-year Treasury yield jumped to 4.437% Thursday morning, raising fears higher rates would send the economy into a recession.
“I’m looking at a labor market that is so tight, I don’t know how you continue to bring this level of inflation down without having some real slowing, and maybe we even have contraction in the economy to get there,” said Kansas City Fed President Esther George to the Wall Street Journal on Wednesday.
Stocks vulnerable to a recession and higher rates led the losses. Materials stocks declined, as did consumer discretionary stocks.
We will train wreck before Christmas 🎄 t.co/n5CBoCCOX1
— Win Smart, CFA (@WinfieldSmart) November 17, 2022
If US inflation shows lagged deceleration for too long on dollar weakness, Fed may pause too soon, requiring another aggressive hiking cycle later, prompting an even stronger leg down in risk assets. This is slowly becoming the base case.
— Adam Butler (@GestaltU) November 16, 2022
Compared to Q3 2016, new vehicle sales are down by 22%
Fed’s Daly sees rates rising at least another percentage point as ‘pausing is off the table’
🇺🇸 The cracks in the US #Treasury #bond market – FT
*Link: t.co/9cMoVY9vMt pic.twitter.com/uTIHl8cB1a— Christophe Barraud🛢🐳 (@C_Barraud) November 17, 2022