Retailers and other consumer companies tumbled after Target echoed Walmart's warning that rising costs were eating into profits.
Target shares plunged by more than 25% after the discount chain said higher fuel costs and supply-chain complications dragged its operating profit margin to 5.3%, far below its 8% goal, and warned margins are likely to remain depressed this year.
This week, Walmart and Target, two of the largest retailers on the U.S. stock market, have seen their biggest daily losses since the 1987 Wall Street crash. "We're finally seeing consumer behavior changing and being reflected in corporate earnings," said Oliver Pursche, senior vice president at financial advisory Wealthspire. Broad-based discounters like Walmart and Target were particularly hard hit by strained household finances, Pursche said.
"Inflation disproportionately impacts people on the middle and lower end of the income spectrum," he said. Target also warned that consumers were buying fewer bulky items like televisions, shifting to goods like fashionable clothes and travel paraphernalia more suited to the post-lockdown environment.
Target partner Ulta Beauty lost more than 12%, despite the discounter posting strong beauty-product sales.
The Consumer Discretionary Select SPDR fund, an exchange-traded fund that tracks the consumer discretionary industry group of the S&P 500, fell by more than 6%, and is down by more than 30% for the year to date.
TJX, parent of T.J. Maxx, saw shares rally after it forecast higher profit margins, even as sales growth slowed.
Lowe's shares fell after the home-improvement chain posted a drop in first-quarter sales, citing cooler weather that delayed some home projects, a day after rival Home Depot said sales rose in the same conditions.
Write to Rob Curran at rob.curran@dowjones.com
(END) Dow Jones Newswires
05-18-22 1727ET
