, two of the sector’s largest constituents, led to their steepest stock market falls since Black Monday in 1987.
The subindex fell almost 9 per cent last week, marking its worst week since the start of the coronavirus pandemic in March 2020. Mr. Rogers and others, however, see retailers’ own cost pressures as a clearer driver of their changed fortunes than consumer pullback. At Walmart, for example, U.S. fuel costs last quarter were more than US$160-million higher than it had expected – more than it could pass through to customers.
The reason for carrying more inventory than usual is that “they lived through the stock-outs of the past two years and know what that cost them,” Mr. Rogers says. Wayne Wicker, chief investment officer at pension plan manager MissionSquare Retirement, says it should not be surprising to see signs of consumers reining in some spending, but last week’s results were nonetheless a “wake-up call” for some investors because many companies had claimed until recently they were handling inflation challenges well.
Despite the visceral market reaction to Target’s results, for example, its new lower forecasts would only return profit margins to pre-pandemic levels.