Facing huge inventory, Target cuts vendor orders, prices

Jun 7, 2022, 4:01 AM | Updated: Jun 8, 2022, 1:00 am
FILE - The bullseye logo on a sign outside a Target store is seen on Feb. 28, 2022. Target's first-...

FILE - The bullseye logo on a sign outside a Target store is seen on Feb. 28, 2022. Target's first-quarter profit took a big hit from higher costs, despite strong sales growth. Target's results Wednesday, May 18, reflect the pressure on retailers' profits coming from surging inflation and persistent clogs in the supply chain. (AP Photo/Charles Krupa, File)

(AP Photo/Charles Krupa, File)

NEW YORK (AP) — Target is canceling orders from suppliers, particularly for home goods and clothing, and it’s slashing prices further to clear out amassed inventory ahead of the critical fall and holiday shopping seasons.

The actions, announced Tuesday, come after a pronounced spending shift by Americans, from investments in their homes to money spent on experiences like travel and nights out for dinner and other pre-pandemic routines. Shoppers are also focusing more on non-discretionary items like groceries as inflation makes them more selective. That’s a change that arrived much faster than major retailers had anticipated.

The speed at which Americans pivoted away from pandemic spending was laid bare in the most recent quarterly financial filings from a number of major retailers. Target reported last month its profit for the fiscal first quarter tumbled 52% compared with the same period last year. Sales of big TVs and small kitchen appliances that Americans loaded up on during the pandemic have faded, leaving Target with a bloated inventory that it said must be marked down to sell.

Other retailers including Macy’s, Kohl’s and Walmart cited rising inventories when they reported their quarterly earnings results last month. Walmart said at its annual shareholders’ meeting on Friday that 20% of its elevated inventory were items the company wishes it never had.

Target declined to give a dollar amount of merchandise orders that are being canceled and depths of the discounts.

In aggressively clearing out unwanted goods, Target wants to make room for what is now in demand, including groceries and makeup products. But Target is also facing sharply higher costs for everything from labor to transportation and shipping, and it will offset price cuts where it can with higher prices for goods now in demand.

“Retail inventories are elevated,” Michael Fiddelke, Target’s chief financial officer, told The Associated Press in a phone interview Monday. “And they certainly are for us, in some of the categories that we misforecast. We determined that acting aggressively was the right way to continue to fuel the business.”

Target is working with suppliers to cover costs for their vendors whose orders are being cancelled. In some cases, some of the raw materials that were meant for some goods will instead be used for other products in higher demand, Fiddelke said. Many of the orders for products being canceled have a long production lead time of nine months, he said.

Target also announced that it will add five distribution centers over the next two fiscal years.

Target said the costs related to the moves will hurt the bottom line in the current quarter. Target now expects its second-quarter operating margin rate will be roughly 2%, down from around 5.3% it had expected last month. For the second half of the year, Target expects an operating margin rate in a range around 6%, a rate it said would exceed the company’s average fall season performance in the years leading up to the pandemic.

Last month, Target forecast its full-year operating income margin rate would be in the 6% range. Target didn’t give a new full range prediction. It also said it secured additional space near U.S. ports to hold merchandise to allow for more flexibility.

Target, however, continues to expect full-year revenue growth in the low- to mid-single digit range and expects to maintain or gain market share for the year.

Shares of Target Corp. fell nearly 4%, or $5.93 to $153.74 in afternoon trading Tuesday.

_____

Follow Anne D’Innocenzio: http://twitter.com/ADInnocenzio

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

Cleveland Browns quarterback Deshaun Watson throws a pass during an NFL football practice at FirstE...
Associated Press

Attorneys seek Deshaun Watson NFL investigation documents

AUSTIN, Texas (AP) — Attorneys for multiple women suing Deshaun Watson over allegations of sexual misconduct are seeking the documents from the NFL’s investigation into the former Houston Texans quarterback. According to the motion filed Friday by the women’s attorneys, Tony Buzbee and Cornelia Brandfield-Harvey, the legal team seeks any and all reports and files […]
17 hours ago
FILE - Argentina's Economy Minister Martin Guzman walks outside of the International Monetary Fund,...
Associated Press

Argentine economy minister resigns amid peso, diesel woes

BUENOS AIRES, Argentina (AP) — Economy Minister Martin Guzman submitted his resignation Saturday, acting at the end of a week in which Argentina’s currency hit an all-time low against the dollar and truck drivers staged protests over shortages of diesel fuel. Guzman announced on Twitter that he had sent a multi-page resignation letter to President […]
17 hours ago
FILE - Taylor Swift appears at a premiere for her short film "All Too Well: The Short Film" in New ...
Associated Press

Man found at Taylor Swift properties faces stalking charges

NEW YORK (AP) — A 35-year-old New York man is facing trespassing and stalking charges after authorities said he entered two New York City residences linked to the famed singer-songwriter Taylor Swift. Police say the suspect, who was arrested Friday, entered one of the residential buildings, located in the city’s Tribeca neighborhood, on March 26. […]
17 hours ago
FILE - A plane drops retardant on a wildfire near homes Thursday, Feb. 10, 2022, in Laguna Beach, C...
Associated Press

US testing new fire retardant, critics push other methods

BOISE, Idaho (AP) — U.S. officials are testing a new wildfire retardant after two decades of buying millions of gallons annually from one supplier, but watchdogs say the expensive strategy is overly fixated on aerial attacks at the expense of hiring more fire-line digging ground crews. The Forest Service used more than 50 million gallons […]
17 hours ago
In this photo provided by Burning Spear Media, LLC, a damaged Pan-African flag flies outside the he...
Associated Press

Flamethrower used to torch Pan-African flag flying on pole

ST. PETERSBURG, Fla. (AP) — A person using a flamethrower set fire Saturday to a Pan-African flag flying on a pole outside the headquarters of the Uhuru Movement, a Black international socialist group based in Florida. Security video released by the group shows the driver of a white Honda sedan pulling up outside the group’s […]
17 hours ago
Associated Press

First Black woman named as Connecticut’s top public defender

HARTFORD, Conn. (AP) — The first Black woman has been appointed as Connecticut’s chief public defender. TaShun Bowden-Lewis, who officially began her job on Friday overseeing the Division of Public Defender Services, said she hopes to provide minority clients with a greater sense of trust in the state’s criminal justice system. “I do want our […]
17 hours ago

Sponsored Articles

...
Dr. Richard Carmona

Great news: Children under 5 can now get COVID-19 vaccine

After more than two years of battle with an invisible killer, we can now vaccinate the youngest among us against COVID-19. This is great news.
...
Day & Night Air

Tips to lower your energy bill in the Arizona heat

Does your summer electric bill make you groan? Are you looking for effective ways to reduce your bill?
...
Arizona Division of Problem Gambling

Arizona Division of Problem Gambling provides exclusion solution for young sports bettors

Sports betting in Arizona opened a new world to young adults, one where putting down money on games was as easy as sending a text message.
Facing huge inventory, Target cuts vendor orders, prices