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Bloomberg
Losses for Walmart Inc and Target Corp are mounting as investors fled the stocks after the US retail giants cut their growth outlook for 2022 — an industry wide warning that inflation is denting consumer expenditures across the country.
Walmart fell 6.6% after posting its biggest one-day decline since 1987 the prior day when it cut its full-year profit forecast on higher costs in fuel and food. Target followed, sinking 26% — its steepest drop in 35 years — after also trimming its outlook on profits due to surging costs. That’s fuelled a selloff in the S&P Supercomposite Retailing Index, which fell over 7%, dragged lower by Dollar Tree, Shoe Carnival, Big Lots Inc and Dollar General Corp.
“Negative revisions in a weak market with investors fearing exposure to consumer names does not create an environment of support for retail stock prices,†said John Zolidis, president of Quo Vadis Capital.
The selling also hit corporate bonds, where retailers including Michaels, Nordstrom, Macy’s and Staples saw their bonds rank among the top losers in the high yield market.
The world’s largest retailer dropped nearly 20% so far this week, bringing its total market value loss to about $73 billion in the wake of its first quarter earnings report. Walmart forecast earnings per share falling by about 1% this year, compared with a prior view of mid-single-digit gains.
No firms tracked by Bloomberg have downgraded their recommendations on the stock yet, but analysts have slashed their price targets, sending the average analyst 12-month target price to $156.35, its lowest level since late 2020.
The disappointing report prompted Truist Securities to downgrade Target to hold
from buy.