MINNEAPOLIS, Minnesota: Amidst the rising costs of essentials, such as fuel and food, and the rapid return by consumers to normalized spending, Target has reported its profits dropped 52 percent, compared with the same period last year.

As purchases of major items, such as large TVs and appliances, during the COVID-19 pandemic have slowed, Target has been left with a sizable inventory that must be marked down to sell.

Target's financial report for the first quarter of the year comes one day after shares of rival Walmart dropped some 17 percent for similar reasons, after it posted quarterly results.

This week, shares of Target Corp. closed down 25 percent, the highest one-day sell-off since the Black Monday market crash of 1987.

However, despite inflation hovering near four-decade highs, consumer spending continues to be strong. Target said its revenues rose 4 percent to $24.83 billon in its most recent quarter, better than expected, even as costs are rising for major retailers.

"Things have changed significantly from even 13 weeks ago. We did not project, I did not project, the kind of significant increases we would see in freight and transportation costs," said Target CEO Brian Cornell.

Meanwhile, Target has reported that first-quarter net income tumbled to $1.01 billion, or $2.16 per share, in the quarter that ended 30th April, while its per-share earnings adjusted for one-time costs were $2.19, far from Wall Street projections of $3.07 per share.

The behavioral change among American consumers is broad and has adversely affected companies that saw considerable profits over the past two years.

According to Laura Veldkamp, finance professor at Columbia University, the constant "yo-yo of demand" has also helped drive inflation higher, because it has made it more difficult for businesses to plan ahead.

As a result, shifting mixes of goods remain in short supply, which pushes up their prices, as demand unexpectedly rises.

In the last quarter, sales at Target stores open at least a year increased by 3.4 percent, and the company posted an 18 percent increase in the same quarter, while online sales increased 3.2 percent, following a growth of 50.2 percent.