With locations in just about every town across America, Target has become one of the most popular places to shop for everything from home supplies to beauty products to toys. The well-known brand is bracing itself for a rough summer, though.
Inflation has wreaked havoc on the American economy, which has left many people holding off on everyday purchases they would have made without question last year. Various stores are feeling the impact of this, including and especially Target.
Target Is Lowering Its Prices To Get Rid of Extra Inventory
Just a few weeks ago, Target's stock plummeted 25% and its shares fell 7%. Target entered the second quarter of the year with a 43% increase in inventory. Soon enough the company realized that this was far too much inventory considering the drop in consumer demand. The expectation was that the company's operating margin rate would be 5.3%, similar to the first quarter of 2022. This expectation has dropped to around 2%.
Target stated that it's trying to "right-size its inventory for the balance of the year and create additional flexibility to focus on serving guests in a rapidly changing environment."
Target CFO Michael Fiddle told Yahoo Finance that this is a slowdown they didn't exactly expect. "It's really a shift in what's at the top of the shopping list for the consumer versus what I would characterize as a slowdown," he said. "We actually do see a continued strong sales environment, traffic and the top line continue to be strong. But over the past several weeks what we have been able to continue to assess is the broader retail environment—and I think as has been reported pretty widely at this point—the level of inventory in retail is high. And we also expect inflation and higher costs to be persistent."
The response to this is to lower prices and attempt to get as much inventory out the door as possible. There's a surplus right now in the stores of things like home products, which people have bought less and less of due to inflation.
If you're a Target enthusiast, this summer may be the time to do some serious shopping because the stores will very likely be slashing their prices. The second half of the year is expected to return to normal due to back-to-school needs and the holidays.