Bad Breath of Inflation Sinks Target, Walmart, Other Retailers on Surging Costs of Products, Labor, and Transportation | Wolf Street

both retailers reported that their costs surged – product costs, transportation costs, labor costs, and other costs. Target reported that its product costs jumped by 10.4%, and that selling and administration expenses rose by 5.6%; and that therefore operating income plunged by 43%, and that its operating margin (operating income divided by revenues) was only 5.3%, down from 9.9% a year ago, which was a shocker, and it blew out the fuse.

Turns out, inflation is eating up retailers’ profit margins. “Throughout the quarter, we faced unexpectedly high costs, driven by a number of factors, resulting in profitability that came in well below our expectations, and well below where we expect to operate over time,” the earnings release said. Shares kathoomphed 25% during the day and afterhours to $161.61, and were down 38.8% from the peak last August:

Bad Breath of Inflation Sinks Target, Walmart, Other Retailers on Surging Costs of Products, Labor, and Transportation | Wolf Street