Welcome to the New Economy: Target Stock Drops 25% In a Day

by Chris Black

It’s good that adults are back in charge. 

Welcome to Biden’s economy:

$TGT stock is falling more than 25% in heavy trading after missing earnings estimates. The retailer said freight and transportation cost increases hit its bottom line. Target also said #inflation issues would continue to bite into full-year profit margins. t.co/ECL6RCVSfM pic.twitter.com/Do9Lyy5z52

— Yahoo Finance Plus (@yfinanceplus) May 18, 2022

Maybe making 60-90% gross margin on discretionary products isn’t a valid business model after all.

What, you didn’t know that clothing is an 80-90 point category? Toys and sporting goods is 55-70 points. Target and Walmart pay $3.80-4.25 for a $10 retail item. They can afford to cut their margins in half. 

People are always shocked at clearance prices when they see 70% off. 

Guess what? The store is still making money. 

What is killing retail is that the distributors can’t make money anymore. The bigger ones like Hasbro are still making double their money, by passing on massive price increases. 

A toy that was $10 ten years ago is now $25. The manufacturing cost didn’t go up 2.5x. 

The retailers could sell the products for a lot less and give consumers a break.

 But they refuse to because their inflated share prices are predicated on those expansive margins.