Target crushed by higher costs and weakening consumer demand
Target says it will continue to resist raising prices despite seeing its own costs balloon.
Why it matters: Companies are all trying to find their sweet spot with consumers when it comes to moving up prices. Retailers are seeing buyers start to pull away when prices on some of the lowest priced items are hiked, while services businesses like restaurants and hotels are finding there’s still more room to pass along costs.
Driving the news: In an earnings call this morning, Target CFO Michael Fiddelke said, “while it’s always the last lever we pull, external conditions led us to raise prices across a broad set of items in multiple categories.”
By the numbers: Target reported a huge decline in net profits last quarter — 52% — due to higher costs from labor, mistimed inventory and inputs like fuel and freight.
- The company reported its costs will also rise by an additional $1 billion this year, more than had been expected.
The big picture: Target’s first quarter woes and results mirrored those of Walmart’s, which were published yesterday.
- Shares of Target closed down 24.9% following today’s report, while Walmart’s stock saw its worst day yesterday since 1987, according to Reuters.
What to watch: Target may be facing a tougher rest of the year than Walmart given it relies more on sales of discretionary products, Arun Sundaram, senior equity research analyst at CFRA, tells Axios.