by Uday Sampath Kumar
(Reuters) – Target reported a nearly 90% drop in quarterly profit on Wednesday and reported weaker-than-expected sales as inflation-hit customers curtailed spending despite steeper discounts.
The action of the American distributor, which has already lost more than 22% of its value this year, fell slightly in the exchanges before the stock market.
The group reported a profit of 183 million dollars (180 million euros) in the second quarter, against 1.817 billion dollars in the same period last year.
Target said its like-for-like sales grew 2.6% in the second quarter ended July 30. Analysts had expected a 3.3% rise, according to Refinitiv’s IBES consensus.
Its operating margin fell in the second quarter due to costs related to the destocking of goods, in particular through deep discounts; it stood at 1.2% during the quarter, missing the 2% target announced last month and down sharply, compared to the 9.8% recorded a year earlier, .
U.S. retailers, including Target and Best Buy, have lowered their profitability forecasts in recent weeks. Consumers, under pressure from the general rise in prices, are reducing their spending on items such as clothing or electronics.
Target, which relies more on non-essentials, was hit harder than retailers like Walmart that stock much of their shelves with groceries and other necessities.
Target reiterated that the group would return to an annual operating margin rate of around 6%, but said it was still “cautious” about demand for non-essential items.
(Reporting Uday Sampath in Bangalore; French version Elena Vardon, editing by Kate Entringer)
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