Target Warns of Squeezed Profits from Aggressive Plan to Clear Unwanted Inventory


The American big box department store chain – Target plans to cut prices and cancel orders to clear out unwanted inventory, to combat inflation and supply chain disruptions. The action would cut its profits, as it marks down unwanted items, cancel orders and take aggressive steps to get rid of extra inventory.  Its share price closed down 2.4%.

Target also shocked investors with earnings that were leading its shares to fall nearly 25%. “We thought it was prudent for us to be decisive, act quickly, get out in front of this, address and optimize our inventory in the second quarter — take those actions necessary to remove the excess inventory and set ourselves up to continue to be guest relevant with our assortment,” CEO Brian Cornell said in an interview.

Target faced skyrocketing demand in the early months of the pandemic, and also stocked up on goods as supply chains delayed shipments. Consumers are now turning away from goods like furniture, appliances to spending more on experiences and going out.

Target is sorting through its inventory, deciding in some cases to pack away merchandise to sell at full price in the future and in other cases to come up with ways to sell through it now, Cornell said.