US markets slumped again after bleak reports from some of America’s biggest retailers fueled fears that rapidly rising prices will send the economy into a slowdown.
Target said higher-than-expected fuel and freight costs hurt profits, which halved from a year earlier.
Its report followed a similarly somber update from rival Walmart earlier.
Executives said customers were increasingly looking for affordability, which limited plans for price increases.
The update sent Target’s shares down 25% — the biggest drop in more than three decades of trading.
Financial markets tumbled on Wednesday amid concerns about the impact on other businesses and the broader US economy, which is fueled by consumer spending.
“What people worry about after seeing Target is more revenue [estimates] need to be mined?” said Thomas Hayes, chairman of Great Hill Capital in New York.
“Consumer sentiment is at a multi-year low and has hit the hip with inflation. So people are looking for signs of inflation slowing, and Target gave them none today.”
The S&P 500 index, which tracks the stocks of a wide range of America’s largest companies, fell more than 4%, while the Dow Jones fell 3.5%.
The Nasdaq fell 4.7%. The declines contributed to weeks of declines in US financial markets.
Target and Walmart updates have been watched closely for signs of how consumer spending is holding up in the world’s largest economy as inflation hits 40-year highs.
Official government data recently showed retail sales rose a healthy 0.9% in April, but some analysts have warned that the figures could underestimate signs of a slowdown – particularly for low-income families – as they are not adjusted for inflation.
Earlier this year, Amazon reported a surprise drop in online sales for the first three months of the year.
Target said sales at stores open for at least a year increased more than 3% in the three months to May compared to 2021. But executives said that as prices rise, shoppers are spending more on essentials and buying fewer items like TV sets and clothes.
It warned investors that costs this year would be $1 billion higher than expected, driven by fuel and freight. The company said the pressure on the supply chain will not ease until at least 2023.
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