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Philip van Doorn

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May 21, 2022, 12:47 p.m. EDT

If you thought Walmart and Target had disappointing results, these retailers did so much worse

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By Philip van Doorn

Retail stocks fell hard this week as bellwether companies disappointed investors with sagging profits.

And now, a review of retailers sheds light on companies that put up worse numbers than those reported by Target Corp. /zigman2/quotes/207799045/composite TGT +1.37% and Walmart Inc. /zigman2/quotes/207374728/composite WMT +1.00% , both of which shook the industry and dimmed investor sentiment in the past two days.

So a list of retailers that have reported declining comparable-store sales is below.

Latest retail flop: Kohl’s reports wide profit miss, says additional buyout bids are due in weeks

Bulging inventories

One might expect companies growing same-store sales during a period of high inflation to book higher profits, but that is not what has been happening for the two retail giants:

  • Shares of Target plunged 25% on May 18 after the retailer reported a 48% decline in earnings per share for its fiscal first quarter ended April 30 from the year-earlier quarter, despite a 3.4% increase in comparable-store sales. The company cited increasing costs , including wages, transportation and storage of inventory. That last item stood out: Product inventories as of April 30 were up 43% from a year earlier. Target CEO Brian Cornell  said customer spending shifted away from “hardlines,” which include furniture, appliances and electronics.

  • Following its earnings report on May 17 for the fiscal quarter ended April 30, Walmart’s stock fell 17% over two trading sessions. The company’s quarterly earnings were down 24% from a year earlier. The main expense increase cited by the company was higher wages, but its inventories were up 32% from a year earlier. Walmart also said customers were shifting to less expensive private-label food items .

It takes time for such large companies to make adjustments, but at least they have remained profitable. But the continued profitability for Target and Walmart wasn’t enough to keep the S&P 500 consumer discretionary sector from falling 6.6% on May 18.

Possible overreaction?

Following the price declines and cuts to analysts’ earnings estimates for the next 12 months, shares of Target now trade at a forward price-to-earnings ratio of 13.3. That compares to forward P/E ratios of 18.5 for Walmart and 16.7 for the S&P 500 Index /zigman2/quotes/210599714/realtime SPX +0.57% , according to FactSet.

In a note to clients on May 18, Jefferies analyst Stephanie Wissink pointed out that Target’s success during the coronavirus pandemic led to some difficult comparisons as the economy was opening up. But she also wrote that this period could be a “perfect storm” for the company, with a “surge in costs to move goods for a goods-intensive business,” the end of federal stimulus for consumers and a “directional normalization in category mix.” She stuck with her neutral rating on Target’s stock, but lowered her price target for the shares to $168 from $252.

Taking a more positive tone, Ally Financial Chief Markets and Money Strategist Lindsey Bell wrote in an email that Target’s results showed “a resilient customer,” while confirming a shift in spending to “experience-based” items, such as luggage and toys.

Bell noted that Target had maintained its sales outlook amid a “tradeoff” as consumers look to cut spending on necessities in favor of spending on “services and experiences.”

Her comments following the Target report built upon similar remarks after Walmart and Home Depot Inc. /zigman2/quotes/208081807/composite HD +0.71% increased their sales guidance. However, Bell also wrote that “investors will likely remain nervous about how long this consumer resiliency [during this period of high inflation] can last.”

The ‘worst’ of retail

The following stock screen begins with the S&P Composite 1500 Index /zigman2/quotes/210600453/delayed XX:SP1500 +0.54% , which is made up of the S&P 500, the S&P 400 Mid Cap Index /zigman2/quotes/219506813/composite MID +0.46% and the S&P Small Cap 600 Index /zigman2/quotes/210599868/delayed SML -0.09% .

$ 160.27
+2.16 +1.37%
Volume: 2.24M
March 30, 2023 4:03p
P/E Ratio
Dividend Yield
Market Cap
$72.79 billion
Rev. per Employee
$ 145.67
+1.44 +1.00%
Volume: 7.29M
March 30, 2023 4:00p
P/E Ratio
Dividend Yield
Market Cap
$388.79 billion
Rev. per Employee
+23.02 +0.57%
Volume: 0.00
March 30, 2023 5:48p
$ 285.36
+2.00 +0.71%
Volume: 3.43M
March 30, 2023 4:00p
P/E Ratio
Dividend Yield
Market Cap
$287.60 billion
Rev. per Employee
+4.94 +0.54%
Volume: 2.98B
March 30, 2023 5:48p
US : U.S.: NYSE Arca
$ 44.77
+0.20 +0.46%
Volume: 34,139
March 30, 2023 4:10p
-1.03 -0.09%
Volume: 359.54M
March 30, 2023 5:48p
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