Target's Q1 profit falls as inflation strikes up, shares fall

Despite strong sales, Target's first-quarter profitability took a big hit from higher manufacturing costs and the company's stock was headed for its biggest sell-off since 1987's Black Monday market crash.

Major retailers have faced both surging inflation and stubborn supply chain problems that are affecting their profits.

For the quarter that ended April 30, Target's net income came in at $1.01 billion, or $2.16 per share, down 52% from a year earlier. FactSet surveyed industry analysts, who predicted earnings of $3.07 a share after one-time costs were adjusted for. The actual earnings per share were $2.19.


Furthermore, it falls short of last year's first quarter profit of $2.09 billion.

CEO Brian Cornell said in a statement that the company faced unexpectedly high costs throughout the quarter, which were a result of a number of factors, thus resulting in profitability that came in well below their expectations, and well below where the company expects to operate over time.

Just 13 weeks ago, Cornell said, the company was experiencing a very different environment and they were not expecting the significant rise in freight and transportation costs.

Target anticipates that this year's costs will be $1 billion higher than it had expected, and they aren't expected to ease this year.

During the latest quarter, Target stores that have been open at least a year saw sales increase by 3.4%. During the same quarter last year, sales increased 18%. The number of online sales increased by 3.2% after increasing by 50.2% in the previous year. Online orders that can be picked up curbside this year increased by 8%. Ninety-five percent of Target's first quarter sales were fulfilled by its stores.

In addition to food and beverages, beauty products and household essentials drove sales growth.