by Retail stocks have seen huge price reductions, as almost every retailer has issued cautious instructions due to supply chain problems and rising costs. Retailers, including Walmart (WMT) – Get the Walmart Inc reportTarget (TGT) – Receive a target company reportAmazon (AMZN) – Get the Amazon.com Inc reportand Costco (COST) – Get the Costco Wholesale Corporation report everyone saw their stock prices fall.
Target shares, for example, fall by almost 40% year-on-year, with most of the decline occurring after the announcement of the company’s first quarter earnings. CEO Brian Cornell commented on his company’s performance in a press release.
“Visitors are still dependent on our wide and affordable product range, as reflected in the first quarter traffic growth of almost 4%. Throughout the quarter, we faced unexpectedly high costs due to many factors, resulting in profitability. “It came well below our expectations and far below where we expect to operate over time,” he said.
The company also revised its forecast for 2022, reducing the expected operating margin from 8%, when it reported fourth-quarter results in a “operating income margin” will be in a wide range, focusing on the first quarter margin. at 5.3%.
This is a rather modest change given the uncertain market, but this news was not liked by investors.
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Target prediction is similar to that of its opponents
Amazon shares also fell in 2022, falling about 37% from year to date. This is not because the company lost market share or saw its customer base go elsewhere, but because it is honest to tell investors that it will not be as profitable given the current market conditions.
CEO Andy Jassy noted that the unique market conditions have made the company have higher costs in its comments on the announcement of Amazon’s first quarter profits.
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Our consumer activity has grown 23% year-over-year over the past two years, with a staggering 39% year-on-year growth in 2020 that required doubling the size of our fulfillment network we created in Amazon’s first 25 years — making it just 24 months. Today, as we no longer chase the physics or capacity of staff, our teams are fully focused on improving productivity and cost-effectiveness throughout our fulfillment network. We know how to do this and we have done it again. This may take some time, especially as we work through ongoing inflationary pressures and supply chain pressures, but we are seeing encouraging progress in a number of customer experience dimensions, including delivery speed performance, as we now approach levels we have not seen in months. immediately preceded a pandemic in early 2020. ”
Basically, it costs money to grow your customer base and capacity and these costs were consolidated in a very short time. It should be noted that Amazon has always been willing to make a rapid investment in its future at the expense of short-term profits.
This can create uneven results, but allows the company to make more money online. Amazon CEOs, whether Jassy or founder Jeff Bezos, never made it to the quarter, on the contrary, they make the right decision for long-term growth and that is actually a good thing for investors.
Walmart has also invested heavily in the development of its supply chain in recent years, though not as aggressively as Amazon. Costco did not have to do this, as it could further develop its supply chain, as its activities were largely driven by members visiting its warehouses.
However, Costco has increased its membership base and improved its already excellent membership retention rate.
Amazon, Walmart, Target, Costco Considered long-term winners
Higher labor costs, higher shipping costs and other inflation concerns affect all retailers. As an investor, ask yourself which companies would be better able to mitigate these issues? Will supermarket chains and retailers be much smaller than Walmart, Costco, Target and Amazon or the larger companies that have invested the most in managing their costs and improving their supply chains?
Even in times of recession, people need to eat and shop at the best-selling retailers. Target, Walmart, Amazon and Costco have done their best to offer the best prices regardless of market conditions.
For now, all four have chosen to absorb some of the higher costs instead of passing them on to their customers. It is an investment in serving their customers and increasing their market share. Making less money for a few quarters in historically unprecedented times does not reflect the weakness of these companies, but actually demonstrates their strength as long-term investments.
