TGT, WMT, COST: Why Are Retail Stocks Down Today?

  • Retail stocks are down today, with Target (TGT) and Walmart (WMT) stocks down 4% and 2% respectively.
  • Target announced today it will be lowering its Q2 operating margin outlook.
  • The company cited excess supply and waning demand as the cause behind its guidance adjustment.
Retail stocks - TGT, WMT, COST: Why Are Retail Stocks Down Today?

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Retail stocks are slumping today following a recent bearish announcement from Target (NYSE:TGT). Target and Walmart (NYSE:WMT) stocks are down roughly 2% at the time of writing while Costco (NASDAQ:COST) eyes a 1% drop.

Retail companies continue to see declines stemming from worsening market conditions. This morning Target announced it will lower its profit guidance for full-year 2022. The retailer announced it expects its second quarter operating margin to drop to 2%, from 5.3%. For full-year 2022 it still expects margins around 6%, however.

The company cited excess supply as a major driver behind the reduced outlook. Target reported having to cancel orders and will have to discount its goods to clear up storage space in its retail stores. This may be largely reflective of waning demand in its physical retail locations. The retailer reported last quarter that its inventory jumped more than 40% as consumers make budget adjustments in response to high inflation.

Target Chief Executive Brian Cornell commented on the company’s recent changes.

Since we reported our first quarter results, we have continued to monitor external conditions and have determined the necessary actions to remain nimble in the current environment.  The additional steps we are announcing today will ensure that we deliver for our guests while driving further growth.

Retail Stocks Slump Amid Bearish Concerns

Target stock has been a cautionary tale since its earnings miss last month. The company stated demand for a number of its departments has declined faster than expected. Since then, the company has been trading near its two-year low with fellow retailers like Walmart in tow.

In fact, the past few weeks have seemingly brought on a wave of recessionary forces onto the retail world.

Just last week Microsoft (NASDAQ:MSFT) reduced its revenue and earnings projections for Q2 2022. Meanwhile, Tesla (NASDAQ:TSLA) Chief Executive Elon Musk tweeted out he has a “super bad feeling” about the economy, alongside reports the electric vehicle giant may cut 10% of its workforce.

At the same time, the U.S. Federal Reserve took perhaps its most hawkish actions yet to lower inflation by ceasing its purchase of bonds as part of its quantitative tightening process. Treasury yields continue to rise in the face of general market uncertainty, further drawing investments away from stocks and other equity-based investments.

These are all largely bearish forces on U.S. consumers, who are already shackled by near record-high gas prices and overzealous inflation. As such, today’s retail slump comes with little surprise.

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.

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