Retail stunner after Target cuts guidance again and sends Walmart, Costco and Dollar Tree lower
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A fresh guidance update from Target Corp. (NYSE:TGT) on margins just a few weeks after its earnings report has rattled the retail sector.
Quo Vadis analyst John Zolidis is amazed that the TGT profit reduction coincides with the company maintaining its top-line outlook and said that it is difficult to believe things really changed that much compared to just three weeks ago when the company reported the quarter and issued guidance.
"Frankly, as of this morning we were still trying to process how the company misplanned its inventory composition so badly against the stimulus-check comparison," he updated.
Zolidis said the second cut to guidance in three weeks certainly gives the firm pause with some other retailer reports looking more solid. The guidance shocker also raises the question if TGT's issues are internal rather than external and could leave shares as "dead money" until investors get the all clear that the first-half 2022 problems are in the past.
Target (TGT) fell 7.50% in premarket action. Across retail, Walmart (WMT) peeled off 2.89% and Costco (COST) shed 2.69% with investors worried that markdowns and heavy inventory positions will weigh on margins. Discounters Dollar General (DG) -3.42% and Dollar Tree (DLTR) -3.10% were also lower. Even Macy's (M) -2.61% and Nordstrom (JWN) -1.60% also felt some Tuesday morning pain.
Read more about Target's guidance update.