By ANNE D’INNOCENZIO, AP Business Writer

NEW YORK (AP) — Target was hit hard by rising costs in the first quarter despite buoyant sales and stocks appeared to be heading for their most severe selloff since the Black Monday stock market crash of 1987.

Profits at major retailers have come under pressure from both soaring inflation and stubborn global supply chain lockdowns.

Target’s net income fell about 52% from a year ago to $1.01 billion, or $2.16 per share, in the quarter that ended April 30. Earnings per share adjusted for one-time costs were $2.19, a far cry from Wall Street projections of $3.07 per share. by industry analysts surveyed by FactSet.

It’s also lower than last year’s first-quarter profit of $2.09 billion.

“Throughout the quarter, we faced surprisingly high costs, driven by a number of factors, which resulted in profitability well below our expectations and well below what we expect to operate. over time,” CEO Brian Cornell said in a prepared statement.

Things have changed significantly from the environment the company experienced just 13 weeks ago, Cornell said, and the company has not anticipated the significant increases in freight and transportation costs.

Those costs will be $1 billion higher this year than the company had anticipated, and Target doesn’t expect those costs to decrease this year.

Target’s report follows Walmart’s quarterly results on Tuesday and there were many similarities between the two, including an early stock selloff. Shares of Target Corp. plunged 24% before the opening bell on Wednesday.

The last time stocks fell so hard was on October 19, 1987, one of the worst days in history for US markets, when the Dow Jones fell more than 20%. However, Target shares then cost less than $4. On Tuesday, shares of Target fell $51.85, hitting $163.43 with about an hour to go until markets open.

Revenue rose 4% to $24.83 billion in the quarter, slightly better than expected.

Sales at Target stores that have been open for at least a year rose 3.4% in the last quarter. It posted an 18% increase in the same quarter last year. Online sales increased by 3.2%, after growing by 50.2%. Same-day services, including curbside online order pick-up, are up 8% this year. More than 95% of Target’s first quarter sales were made through its stores.

Sales growth was driven by items that shoppers purchase frequently, such as food and beverages, beauty and household essentials.

In a media call with reporters Tuesday, executives at the Minneapolis company said customers remain in good financial health and the spending pattern is returning to something more similar to before the pandemic.

Americans are buying fewer televisions, bicycles and kitchen appliances than they did during the two years of the pandemic. These sales have shifted to luggage, for example when people start to travel again. This quick and unexpected change has led to higher markdowns and an increase in bulky items that aren’t selling as quickly as Target had anticipated.

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