Amazon's stock price got dragged down along with Target and Walmart after they released their respective earnings reports. The stocks had their worse single-day declines in decades as investors lost confidence in the companies' abilities to contain inflationary pressures.
On Tuesday, Walmart's stock price dropped by more than 6.79%, its worst single-day drop since 1987, following the release of its worse-than-expected earnings report. Meanwhile, Target's stock price plummeted by more than 26%, its worst drop since 1987, after it reported lackluster earnings. Amazon's stock was also pulled down by around 7.6%, ending the trading day at $2,131.65 per share.
Both Walmart and Target revealed dropping profits, surging inventory, and a surge in markdowns in their respective quarterly results. The numbers they reported stunned investors and sparked a massive selloff of their stocks. Walmart and Target were similarly unsure when prices for commodities, energy, and their supply chains would go back to normal levels.
Beyond the figures, there were warning indicators for consumers' changing spending habits amid the growing inflation and how budgets were being pushed, particularly for working-class households. Walmart said they had noticed significant transitions in customers' spending habits, such as a shift from buying gallons of milk to half-gallons and from brand names to cheaper private-label items. Walmart's CEO, Doug McMillion, attributed its poor results to the continued rise in food inflation, which has been soaring at double-digit rates. McMillion warned that he expects inflation to continue to rise.
Then there's the change in spending from goods to services. Customers are shifting their purchases away from larger tangible products like refrigerators and televisions and toward experiences like restaurant gift cards. Target said it is possible that throughout the pandemic, people had put off purchasing gadgets, household goods, and furnishings. The company said because most of these things don't need to be improved or replaced for years, sales may remain stagnant.
Amazon, like Walmart and Target, is subject to the continued disruptions caused by geopolitical issues. However, it stands to lose even more given the higher demand and cost to maintain its operations and its more than 1.6 million global employees. Analysts said Amazon would be among the hardest hit by sustained inflationary pressures due to costs such as labor, fulfillment, and shipping,
In its earnings report published last month, Amazon had outlined the possible impact of inflation and overcapacity on its future prospects. Given the numbers that were reported by Target and Walmart, investors are now likely expecting darker times ahead for all major retailers.