Geoffrey Smith

Investing.com — Target Premarket trading for (NYSE) stocks dropped on Wednesday as Walmart (NYSE) followed suit in cutting its estimates for inflation.

The big-box retailer badly missed estimates for profit in the three months through April, adjusted earnings per share of only $2.19, over 40% below consensus estimates of $3.06. The retailer raised prices for customers, resulting in comparable sales rising by 3.3%.

Target stock fell 21% by 8:15AM ET (1215 GMT) in premarket trades, setting it up to open at its lowest level for two years.

Walmart on Tuesday reported an identical pattern, warning of higher labor costs and a potential impact on its bottom line.

Earnings were down by nearly half from a year earlier, as discounting to shift excess inventory, along with a surge in freight and transportation costs, reduced Target’s operating margin to 5.3%, well below its medium-term aspiration of 8%.

Chief executive Brian Cornell said he doesn’t expect any meaningful improvement in margins in the current quarter, and even an improvement in the second half will probably only take the full-year margin back up to around 6%.