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As of 3:30 p.m. Wednesday May 18 shares of Target (TGT) were down 25% for the day after the company reported a big earnings miss for the first quarter.

Let’s be clear. The sales picture at Target was very positive for the quarter. Same store sales were up 3.3% in the quarter. That was about three times higher than Wall Street analysts had expected. Revenue was up 4%. Here again Target’s $25.2 billion in revenue beat expectations for $24.3 billion.

But earnings were terrible at $2.19 a share versus forecasts for $3.05 a share.

The problem was operating margin as higher costs drove operating margin for the quarter down to 5.3% versus an expected 9.5%.

What really killed the stock, though, was the company’s admission that this problem is going to go on for a while. Target has a long-term goal of 8% operating margins, but CEO Brian Cornell said, the company was abandoning that target for 2022.

My big worry is that this margin squeeze will continue into 2023 as the Federal Reserve struggles to get inflation down and that in 2023 or 2024 high inflation will meet up with slowing growth and a possible recession.

In my opinion Target doesn’t the low price aura to compete with Walmart (WMT) and Costco (COST) in that kind of environment. And it will be hard enough for those two companies to cope with that mix.