Off Target: The Truth About Consumer Trends

If this hasn’t been one of the most whirlwind quarters on Wall Street, I don’t know what would be.

In the last few months, we’ve seen earnings upsets through a range of organizations from Alphabet (GOOG) to Amazon (AMZN) – with some companies missing the mark by vast margins. And while I recently reported on an upswing in April retail activity, Target (TGT) just tanked.

The entire ticker experienced an unheard-of profit plunge this past quarter. Quoting CNN Business:

“The retail giant reported a stunning 52% drop in profit for the first quarter, badly missing Wall Street’s forecasts. The company blamed higher expenses due to continued supply chain disruptions. Consumers also are holding back on nonessential purchases because of rampant inflation.

“Shares of Target… plunged 25% Wednesday, its worst day since 1987.”

Rival Walmart (WMT) gave it a run for its money in that regard on similarly bad news.

The fallout from these earnings flubs affected the entirety of the stock market, dragging the Dow down more than 1,150 points and the S&P 500 down 4%. Retail giants such as Costco (COST), The Dollar Tree (DLTR), and BestBuy (BBY) took the brunt of this unprecedented panic.

It appears that while shopping has remained steady in these retail stores, consumers are only spending on essentials like food and beverages. And, admittedly, beauty products.

Big-ticket items like televisions, gaming consoles, and workout gear have taken a hit, however, as Americans tighten their belts. They don’t have that kind of spending power any more thanks to inflation.

As already mentioned in that CNN quote as well, labor shortages and supply chain issues are also contributing to the lack of profits. Strapped as well, retailers are simply spending more on human capital and costly logistics.

So it would appear that the hope we had for our retail sector was misinterpreted in terms of margin. While the act of shopping may be on an upswing, the contents of the carts and order totals appear to be tanking the retail world over.

More Non-REIT News to Know About

It seems that the rise in interest rates coupled with record home prices are having a cooling effect on the housing market.

April home sales slid to their slowest pace since before the shutdowns, falling 2.4% from March. These numbers are the latest indication that the insane real estate boom from the last two years may finally be taking a breath.

With record-low interest rates and Covid-inspired incentives, the housing market has seen its wildest era since before the crash of 2008 up ‘til this point.

Then again, if we’re being honest and accurate, it’s still pretty hot in a historical context. Home prices still increased at an extraordinary 14.8% in April.

Does this decrease in demand mean that the Fed’s half-point interest hike is having the desired effect on inflation? Or are home prices simply too high to attract new buyers?

Honestly, I think it’s too early to tell. But at least we’re seeing some respite in an otherwise rabid market.

The World According to REITs

Blackstone’s Billion-Dollar Buy

As I reported recently, Blackstone (BX) has been in a buying frenzy the last couple of months. Its private real estate investment trust (REIT) wing, Blackstone Real Estate Income Trust, has attained assets at an incredible rate.

It also just announced yesterday the acquisition of all Resource REIT’s (RSRL) outstanding shares of common stock. This $3.7 billion-dollar, all-cash transaction includes buying up the smaller company’s remaining debt.

“We are very pleased to reach this agreement with BREIT, as it will provide significant and certain value to our stockholders,” said Alan F. Feldman, chairman, and CEO of Resource REIT. “The transaction’s premium represents the cumulative hard work and dedication of our talented team of professionals, and we are confident that these communities are in good hands with Blackstone.”

On the heels of this acquisition, Blackstone’s stock leaped a little over a point, kicking five days of stagnation, to hit about $105 per share.

Brad Thomas is the Editor of the Forbes Real Estate Investor.

Disclaimer: This article is intended to provide information to interested parties. ...

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