The conventional wisdom among Wall Street analysts was that shoppers would return to stores and drive bounce-back quarters for big box retailers in Q1 2022. But amid continuing supply chain struggles, only the first half of that assumption has held true.
Target Corp. (NYSE: TGT) reported Q1 2022 earnings before the bell Wednesday that revealed strong sales growth but dwindling profits. The retailer missed sharply on earnings per share, much like competitor Walmart (NYSE: WMT), which reported earnings the day before. Shares of Target stock were down more than 20% in premarket trading Wednesday.
Looking only at Target’s sales figures paints a deceptively rosy picture. Comparable sales — those that come from stores open at least 13 months or from online — grew 3.3% in the quarter, comfortably beating Wall Street’s estimate of 0.8%, per StreetAccount. Both in-store and digital comparable sales grew at a similar rate.
Watch: Will return to in-person shopping thwart e-commerce?
“Our first-quarter results mark Target’s 20th consecutive quarter of sales growth, with comp sales growing more than 3% on top of a 23% increase one year ago,” said Target CEO Brian Cornell in a prepared statement. “Guests continue to depend on Target for our broad and affordable product assortment, as reflected in Q1 guest traffic growth of nearly 4%.”
Yet those strong sales numbers delivered a weak quarter. Target’s adjusted earnings per share of $2.19 fell far short of analyst expectations for $3.07, marking a 40.7% decline year-over-year. Operating income margin rate of 5.3%, meanwhile, was much lower than the big box retailer itself anticipated. Net profit for Q1 was slashed by more than half (52%).
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