A rough earnings week in retail, with Walmart, Target, and Kohl’s facing inflationary pressures

What a week for retailers. So much happened that we thought it worthy of a recap:

🛍️ Tough times: Inflation is the name of the game, and basically everyone is losing. Walmart and Target missed on their Q1 earnings, both citing increased expenses and excess inventory to explain the stunning numbers.

• Target saw net profits drop by a staggering 52%, and the company’s stock price sank 25% on Wednesday, its worst day since 1987.
• Walmart’s net income in Q1 fell to $2.05 billion from $2.73 billion YoY, while revenue growth was only marginal at $141.6 billion, up from $138.3 billion last year.

Walmart CEO Doug McMillian said the company stocked up on inventory to try and get ahead of demand, but that proved to be a double-edged sword.

“We like the fact that our inventory is up because so much of it is needed to be in stock on our side counters, but a 32% increase is higher than we want,” McMillian told analysts Tuesday. “We’ll work through most or all of the excess inventory over the next couple of quarters.”

Kohl’s was in a similar boat. It also missed on earnings and cut its sales and profit outlook for the year while in the midst of a potential sale of the company.

🔨 Kind of sweet home: The two major home-improvement retailers tell a slightly different story. While Lowe’s earnings also missed Wall Street’s expectations—reporting a YoY net sales drop from $24.42 billion to $23.66 billion—Home Depot’s net sales jumped 3.8% to $38.91 billion.

• Lowe’s attributed its results to a chillier spring, leading DIYers (roughly 75% of its biz) to put projects on the back burner.
• Home Depot, on the other hand, says its customers aren’t shying away because of inflation. While the number of transactions dropped 8.2% in Q1, Home Depot’s average ticket jumped 11.4%.

“With these inflation rates, it’s a very unique year in inflation, and [the] ticket is higher [than] the norm for sure,” COO Ted Decker told analysts Tuesday. “But again, the consumer is hanging in there.”

👟 Shoe now: And, in a surprise move, Under Armour announced that CEO Patrik Frisk would step down. The retailer said it’s taking the opportunity to “start a new chapter of growth.”—KM