Retail Stocks TGT, WMT, KSS, BBY, LOW, DLTR Stumble on Inflation Woes

  • Retail stocks across the market are down today following several disastrous earnings calls
  • Some analysts believe the retail selloff is due to mounting inflation concerns
  • Yesterday, Federal Reserve Chair Jerome Powell made comments suggesting aggressive potential interest rate hikes to combat inflation
a figure of a shopper standing on top of a credit card
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Retail stocks are in the midst of a brutal pullback in the wake of an unforgiving earnings season. The S&P 500 is down more than 2.5% at the time of writing, largely fueled by massive selloffs in the retail sector. Inflation continues to eat away at retailer margins and, by consequence, investor sentiment.

Target (NYSE:TGT) and Walmart (NYSE:WMT) are likely the brand names pushing retailers down today. Both of the discount mega-giants reported their financial results this week, and investors were clearly disappointed.

In its earnings call yesterday Walmart announced a 25% year-over-year (YOY) drop in quarterly earnings, largely on rising costs and shifting consumption preferences. Shoppers gravitated toward lower-cost, lower-margin food items, largely avoiding the big-ticket tech and discretionary items. As such, the company lowered its profit outlook for full-year 2022. It now expects a 1% drop in earnings per share (EPS), compared to the previously expected mid-single-digit increase in profit.

Investors didn’t react kindly to the news. WMT stock dropped more than 11% on the earnings miss, its worst single-day drop in years.

Today, Target seems to be the name behind the retail space selloff taking root. TGT stock is down 25% at the time of writing after a miserable Q1 earnings call this morning. The discount retailer reported first-quarter EPS of $2.16, 48% lower YOY and far below analyst projections. The retailer faced many of the same issues that plagued Walmart. This includes higher operating costs and slowed sales in a number of its departments.

Retail Stocks Slide as Fed Warns of Continued Interest Hikes

Financial markets are deep in the red today as the latest retail earnings misses are compounded by recent hawkish comments from the Federal Reserve. Yesterday, Fed Chairman Jerome Powell told The Wall Street Journal the Fed will not hesitate to repeatedly raise interest rates to get decades-high inflation under control.

Earlier this month, the Fed raised rates for the second time this year, by half a percentage point. This came as something of a reassurance as some feared a larger hike of 75 or 100 basis points.

On Tuesday, however, Powell iterated the degree to which the Fed would take necessary action to lower prices. “If that involves moving past broadly understood levels of neutral we won’t hesitate to do that. We will go until we feel we’re at a place where we can say financial conditions are in an appropriate place, we see inflation coming down,” Powell said.

Retailers are down across the board in the wake of Powell’s comments and Walmart and Target’s recent earnings failures. Best Buy (NYSE:BBY), Lowe’s (NYSE:LOW), Kohl’s (NYSE:KSS) and Dollar Tree (NASDAQ:DLTR) are all in the red today as the Nasdaq Composite eyes a more than 3% drop.

On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

With degrees in economics and journalism, Shrey Dua leverages his ample experience in media and reporting to contribute well-informed articles covering everything from financial regulation and the electric vehicle industry to the housing market and monetary policy. Shrey’s articles have featured in the likes of Morning Brew, Real Clear Markets, the Downline Podcast, and more.

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