Why are ASX 200 retail shares getting hammered on Thursday?

The impact of international retail monoliths’ disappointing earnings have seemingly spurred a sell-off of ASX 200 retail shares.

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Key points

  • ASX 200 retail shares are suffering on Thursday with many of the sector's biggest names leading the sell-off
  • It comes after US retail monolith Target released disappointing quarterly earnings hot on the heels of similarly frustrating results from Walmart on Tuesday
  • The retail giant's struggles have sparked concerns of a recession in the US 

Today has proven disastrous for many S&P/ASX 200 Index (ASX: XJO) retail shares as the market reacts to news from overseas.

Right now, the S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) is the ASX 200’s second worst performing sector.

It’s down 2.9% at the time of writing. Comparatively, the broader ASX 200 is recording a 1.56% slump.

And some of the consumer discretionary sector’s biggest names are among its biggest fallers on Thursday.

So, what’s going so wrong for ASX 200 retail shares today? Let’s take a look.

Why are ASX 200 retail shares struggling?

Some of the ASX 200’s most recognisable retail shares are among today’s worst performers. And there’s a good reason behind their dip.

The Wesfarmers Ltd (ASX: WES) share price is the sector’s worst performer, recording a 7.41% fall.

On its heels are those of JB Hi-Fi Limited (ASX: JBH) and Super Retail Group Ltd (ASX: SUL) with falls of 6.34% and 6.03% respectively.

Meanwhile, shares in Harvey Norman Holdings Limited (ASX: HVN), City Chic Collective Ltd (ASX: CCX), and Premier Investments Limited (ASX: PMV) are down 5.35%, 4.49%, and 1.98% respectively.

The ASX 200 retail sell-off seems to have been spurred by United States retail monoliths Target Corporation (NYSE: TGT) and, to a lesser degree, Walmart Inc (NYSE: WMT).

The former released its quarterly earnings overnight (Aussie time) to the market’s disappointment.

The near US$100 billion company’s earnings per share (EPS) plunged 48% last quarter as it struggled with lower-than-expected sales, supply chain issues, and increased freight costs.

Its share price tumbled a whopping 25% overnight.

Additionally, Target’s results dropped just one day after Walmart announced its income had slipped 23% over the quarter amid supply chain issues, higher wage costs, and inflationary pressures.

The major US retailer’s tumbling earnings, understandably, sparked concerns a recession could be nigh.

That in turn likely weighed on the S&P 500 Index (SP: .INX) and the Nasdaq Composite (NASDAQ: .IXIC). They fell 4% and 4.7% respectively as Australia slept.

Of course, recessions generally negatively affect consumer spending and, thus, retailers.

Therefore, such talk – and the poor performances of their international peers – is likely weighing on ASX 200 retail shares today.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Harvey Norman Holdings Ltd. and Super Retail Group Limited. The Motley Fool Australia has positions in and has recommended Harvey Norman Holdings Ltd., Super Retail Group Limited, and Wesfarmers Limited. The Motley Fool Australia has recommended Premier Investments Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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