Target Shares Plunge by Most in 35 Years

(KNSI) – Another retailer saw unprecedented stock market declines on Wednesday. This time, it hit home. Minnesota-based Target Corporation lost nearly $25 billion in market value on Wall Street. Its shares fell almost 25%, the worst one-day performance since the Black Monday crash in October of 1987.

Earlier this week Wal-Mart stock suffered shocking losses, more often associated with volatile technology shares than those of a big box retailer. The pain may not be over for investors.

Target’s profit fell by 43% compared to the same quarter last year and they guided lower for the rest of 2022. The company said the past 60 days have been a rollercoaster as fuel costs surge. Target is spending $1 billion more than expected to get apparel, groceries, and other goods to its stores.

College of Saint Benedict Economics Professor Louis Johnston says retail stocks do not necessarily mean the consumer is rolling over. Americans are spending, but it is on different things than what dominated the past two years.

“With this pandemic, people bought a lot more goods for the last couple of years. They couldn’t go out to eat and do other services, so they increased the amount that they were buying at Wal-Mart and Target, and retail places like that. Well, now that’s kind of ebbing,” he says.

Many stocks are seeing their fortunes reverse in 2022. At companies like Amazon and Netflix that means layoffs. Uber and Meta, the parent company of Facebook and Instagram, are promising similar cuts, or at best hiring freezes. Johnston says the fate of the economy hangs on whether Target and others join in. He says the chances of a recession sit at 1-in-4 right now. If the labor market turns into a headwind that could potentially be the tipping point as other hurdles are already apparent.

For Wall Street, the retail crash brings its own set of questions. The NASDAQ and S&P are already in a bear market. Sometimes they resolve themselves quickly, a speed bump on the way to more prosperity. At other times, like in 2000 and 2008, it becomes a prolonged drawdown. Breadth plays a huge factor in the magnitude of stock market moves. The worst plunges occur when safe stocks like consumer staples and utilities fall in conjunction with cyclical companies like automakers.

Johnston says those names are looking at a lot of the same challenges as Target. “General Mills and packaged food…they’re going to have higher transportation cost. They’re going to have higher input costs for their raw ingredients and things like that, and then the sales are going to be slowing down. So, they’re going to get squeezed in terms of profit,” he warns.

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