Target to aggressively cut prices, cancel orders to shift unwanted inventory
Target has announced a major move to "right-size its inventory" ahead of busier shopping seasons by aggressively cutting prices and canceling orders from suppliers.
The Minneapolis-based retailer saw its share price drop by 9% ahead of the market open Tuesday after it revealed its second quarter plan that will involve "additional markdowns" and "removing excess inventory" ahead of the fall and holiday season.
It comes after a period in which the company has been taken by surprise by the rapid consumer shift away from pandemic spending, with the Associated Press noting Americans are once again spending heavier amounts on travel, dining out, and "dressier clothes."
This in turn has contributed to Target having apparently brought in too many goods, particularly in the home category, with the company's most recent results revealing a sales weakness in larger ticket items such as TVs and kitchen appliances.
As a result, expect to see some major price cuts from Target on these kinds of items as the company sheds unwanted inventory.
Target says that it expects to continue seeing strong results in grocery, household essentials, and beauty, but going forward it will be "planning more conservatively in discretionary categories like Home, where trends have changed rapidly since the beginning of the year."
To this end, it will be cutting orders from suppliers to reduce the inventory it has in some of these discretionary categories going forward to reflect changing consumer habits.
The company says it will also be "pursuing aggressive options to control costs," working with vendors to "help offset inflationary pressures."
Because of the changes announced Tuesday, Target expects its profit margin will be around 2%, which is a significant reduction on the 5.3% it expected a few weeks ago.
