Retail earnings week took a big turn for the worse Wednesday.
A day after Walmart (WMT, -6.8%) sounded the alarm with a mixed quarterly report that suggested inflation was taking a toll on American consumers, Target (TGT, -24.9%) confirmed those concerns with an equally problematic set of results. That in turn sparked a deep blood-letting across most consumer stocks and sent the Dow to its worst single-day decline since June 2020.
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As we detailed in today's free A Step Ahead newsletter, Target topped Wall Street's expectations for quarterly revenues, but it missed profit estimates by a country mile and issued a disappointing full-year operating profit. While consumer spending remained strong, it shifted from more discretionary purchases to staples such as groceries, plus spending on items such as luggage hinted that consumers are preparing to shift their dollars toward experiences rather than goods. Meanwhile, TGT projected it could need to absorb roughly $1 billion in other inflation-related costs, such as higher fuel and diesel prices.
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