Earnings reports from
The weak results surprised investors who were closely watching the sector to see how inflation is impacting various businesses. Companies had already been raising prices on goods to offset higher costs and boost their profit margins. Consumer spending remained resilient throughout 2021, despite rising costs. But after Russia’s invasion of
Consumers also shifted spending from high-priced discretionary items to necessary goods, or just pulled back altogether as higher food and gas costs ate up more of their incomes.
"The consumer suddenly looked much more vulnerable” last quarter, said
Target’s profit tumbled 52% from a year ago as costs piled up.
Inflation is at a four-decade high and the
Retailers' troubles are sounding the alarm for other areas of the economy too.
The labor market's slow recovery from the pandemic over the last two years has left it still 1.2 million jobs below pre-pandemic levels. The retail sector’s recent weight on the broader market could next bleed through to overall hiring as employers look to control costs, said
Meanwhile on
“The stock market sell-off could dampen business sentiment and make some businesses more cautious about hiring, especially businesses that are cash flow negative and rely on investors’ money to fund operations like many startups," Adams said.
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