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Target Plunges 25%, What About Yesterday's Big Retail Sales Blowout?

The advance retail sales reports by the commerce department were stunning. Reports by Target and Walmart strongly suggest something else.
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Advance Retail Sales data from commerce department, chart by Mish

Advance Retail Sales data from commerce department, chart by Mish

Target Stock Sinks 25% on Earnings Miss, High Costs

The Wall Street Journal reports Target Stock Sinks 25% on Earnings Miss, High Costs

Target Corp shares tumbled after the retailer posted lower quarterly earnings and said it would absorb higher costs this year rather than raise its prices.

Sales at the Minneapolis-based retailer increased in the most recent quarter as shoppers spent more on food and groceries and even luggage as they prepared to travel again, but supply-chain costs and inflationary pressures cut into profits. Like Walmart Inc., its larger rival, Target reported quarterly earnings that missed Wall Street’s forecasts.

Target shares fell 25% to about $162 in Wednesday trading, putting the company on pace for its largest single-day percentage decrease since 1987, according to Dow Jones Market Data.

On Wednesday, the company said earnings for the April quarter were hurt by higher markdown rates and inventory impairments, and lower-than-expected sales in those discretionary categories.

Key Points

  • Higher markdowns
  • Inventory impairments
  • Lower than expected sales in discretionary items
  • Inability to raise prices 

Walmart Warning Signs

Bloomberg reports Walmart Flashes a Warning Sign to the Entire Consumer Economy

The world’s biggest retailer on Tuesday reported profit that fell short of Wall Street expectations and downgraded its outlook for full-year earnings per share from a mid-single digit increase to a 1% decline. Chief Executive Officer Doug McMillon said the bottom-line results were “unexpected” and reflect the “unusual” environment. Walmart shares tumbled more than 11% on Tuesday, the most in 35 years.

But higher staff costs, bloated inventories and more expensive fuel took their toll on profits. Each accounted for about a third of the shortfall.

Bloated inventories. Gee who warned about that? 

And if inventories are bloated, what does that mean about expected sales or already visible falling demand?

Not to Fear, Households in Good Shape

What a hoot. Yellen seems to be angling for my Hoot of the Day award. 

Meanwhile, back in the real world, let's check in on millennials.

Prepare for Over Supply

Millennials Not the Second Coming of Boomers 

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Danielle DiMartino Booth and Ivy Zelman provide the Tweet of the day.

"Demographic analysis found that GROWTH of Boomers entering prime home buying years was ~4x today’s Millennials."

Housing Starting to Falter

And as noted earlier today Single-Family Housing Starts to Shows Serious Cracks On Top of Negative Revisions

Question of the Day

What about advance retail sales?

That's a good question. Yesterday, I reported Retail Sales Easily Beat Expectations, US Treasury Yields Jump in Response

I was shaking my head at those numbers yesterday. Retail sales rose 0.9 percent with the CPI up 0.3 percent for the month. Real sales of 0.6% is a big number.

But is it real?

Thought of the Day

  • April was a last big hurrah for consumers for unexpected and unexplainable reasons.
  • Alternatively, major revisions to April advance sales are coming.

Either way, recession is on the way, this year, not next.

This post originated at MishTalk.Com.

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