Target's Miss Adds To Stagflation Concerns

US retail giant Target's miss on EPS and weaker guidance is dragging stock futures lower. Target is now down 17% premarket; it had been an outperformer this year, down 7% this year as of Tuesday vs -26% for the S&P consumer discretionary index.

• Along with Walmart's huge miss Tuesday, retail giants have not been coping well with the high inflation environment. One never wants to make too many macro conclusions from something like this but the share price reaction suggests, as did Walmart's yesterday, that equities haven't yet fully priced in stagflationary risks. Quotes from the Bloomberg writeup of Target's results:
• On rising costs: "Target said fuel and freight were $1 billion more than expected during the first quarter, while additional hits came from higher pay for warehouse employees and markdowns driven by bloated inventories."
• On consumer activity: Despite higher-than-expected revenue, "strong demand for food and beverages, beauty products and household essentials went along with 'lower-than-expected sales in discretionary categories,' Target said. That’s a sign that shoppers are pulling back as they struggle to buy basic goods."
• On passing along prices to consumers: The CFO "said the company has been raising some prices, although it’s also trying to avoid turning off customers with big increases."