Analysts from Wall Street believed that in the first quarter of 2022, buyers will return to stores and go to the implementation of large retailers.

Target Corp. (NYSE: TGT) reported earnings in the first quarter of 2022 before a call on Wednesday that showed strong sales growth but declining profits. The retailer fell sharply in earnings per share, as did competitor Walmart (NYSE: WMT), which reported earnings the day before. Shares of Target fell more than 20% on Wednesday in pre-market trading.

Just look at the sales figures Target paints a deceptively pink picture. Comparative sales – those coming from stores open for at least 13 months or from the internet – rose 3.3% for the quarter, comfortably surpassing Wall Street’s 0.8% estimate on StreetAccount. They grew at a similar rate in both stores and digital comparable sales.

“Our results for the first quarter mark the growth of Target sales for the 20th consecutive quarter, with sales of the company growing by more than 3% compared to growth of 23% a year ago,” said Target CEO Brian Cornell in a prepared statement. “Guests are still dependent on Target for our wide and affordable product range, which is reflected in the growth of guest visits in the first quarter by almost 4%.”

However, these strong sales figures delivered a weak quarter. Target’s adjusted earnings per share of $ 2.19 did not significantly fall short of analysts ’expectations of $ 3.07, a decrease of 40.7% over last year. The operating profit rate of 5.3%, meanwhile, was much lower than expected by the major retailer itself. Net income for the first quarter more than halved (52%).

Target links weaker-than-expected first-quarter figures to “deteriorating inventories” and costs associated with transportation and supply chain disruptions. He also referred to the increase in compensation and the number of employees in their distribution centers.

“We saw much higher-than-expected freight and transportation costs, as well as a sharper change in our sales structure than we expected. This has led to surplus stocks, most of them in bulky categories, which puts extra strain on our already strained supply chain, ”Cornell added in a Target earnings report for the first quarter of 2022.

Target also pointed to a change in consumer habits as a possible culprit. It says that sales in some categories fell than expected, and for the quarter decreased large goods such as TVs and kitchen appliances.

“While we expected a slowdown after the stimulus [apparel, home and hardlines] categories, and we expected consumers to continue to shift their spending from goods to services, we did not expect the scale of this shift, ”Cornell told investors during a call about profits.

Read: Targeted planning of logistics overhaul for 2022

Read: Walmart’s fiscal results for the first quarter are very easy

The first quarter of 2022 was a similar story for competitor Target Walmart. The world’s largest retailer’s comparative sales rose 3%, but its adjusted earnings per share of $ 1.30 did not take into account analysts ’estimates of $ 1.48 as well as its own forecasts.

In a statement, Walmart President and CEO Doug McMillan called the results “unexpected.” McMillan told analysts that spending spikes in the second half of the quarter, partly caused by Russia’s invasion of Ukraine in late February, happened “very quickly” and put Walmart in a catch-up mode.

Walmart shares traded at a 365-day low of $ 131.35 on Tuesday at the close of the market.

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