Target warned during its fiscal first-quarter earnings in May that it was dealing with a glut of inventory in "bulky categories" like kitchen appliances, TVs, and outdoor furniture, Cornell said during a conference call with investors. Target plans to focus on merchandise that remains popular with customers - items like beauty products, household essentials, and back-to-school supplies - while offloading goods that shoppers no longer want, like home goods or cumbersome patio furniture, which Target worked to clear out with a sale during Memorial Day weekend, Cornell told CNBC's Melissa Repko. Baker sensed a hint of optimism in investors’ reaction, with Target’s stock avoiding the nosedive it took before and the broader market seemingly taking the news in stride.Account icon An icon in the shape of a person's head and shoulders. Stocks have recovered somewhat since then, and on Tuesday the markets appeared more resilient than they were when Target announced its earlier profit warning: After an initial wobble, the S&P 500 ended the day slightly higher. Those reports helped spark a decline in the S&P 500 that dragged it down briefly into bear market territory, defined as a fall of 20 percent from a recent peak. That came shortly after Walmart announced similarly downbeat earnings, dented by higher labor and fuel costs. Target’s warning on Tuesday followed its disappointing earnings report last month, in which an unexpectedly large rise in inventory played a role. ![]() (He left unsaid the impact on Target’s profit margins.) “Not only were they over-inventoried - a lot of their competitors were over-inventoried as well, and that’s what they misjudged.”īecause other big-box stores are now also trying to slash inventory, Target is “going to have to be aggressive with markdowns,” he added.Įven President Biden weighed in on Target’s travails, saying in a statement mostly about the trade deficit that “one of the nation’s largest retailers announced that it will take swift action to lower prices for certain goods,” playing up the potential effect that the company’s markdowns may have on reducing stubbornly high inflation. “It’s certainly a surprise,” said Michael Baker, a managing director and senior retail analyst at D.A. It said it planned to add storage capacity near ports to hold more goods and open more distribution centers to “add flexibility and speed” in its supply chain. “Trends have changed rapidly since the beginning of the year,” the company said in its statement. Target’s ballooning inventory reflects a mix of merchandise that hasn’t - or can’t, for supply chain reasons - keep up with this shift. But consumers are now turning away from goods like furniture, appliances and other products for staying home and shifting to spending more on experiences and going out. Target, like many retailers that faced skyrocketing demand in the early months of the pandemic, stocked up on goods as snarled supply chains delayed shipments. It cut its forecast for profit then, and lowered it even further on Tuesday. Just three weeks ago, Target shocked investors with earnings that were much worse than expected, leading its shares to fall nearly 25 percent. ![]() It is the latest move by a major retailer revealing how inflation and shifts in consumer habits are swiftly changing the outlook for business. Target’s share price closed down 2.4 percent. The actions would cut its profit in the current quarter, the company said, pushing its shares down. Target plans to cut prices and cancel orders to clear out unwanted inventory, announcing a series of steps on Tuesday to combat inflation and supply chain disruptions.
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