Jun 7, 2022 - Economy

Target to slash prices as it faces inventory glut

woman pushing cart out of Target

A Target story in Miami. Photo by Joe Raedle/Getty Images

Target's excess inventory problem will eat into its profits this quarter, the retailer warned Tuesday.

Why it matters: This year's already been tough for Target, which is trying to adjust to a new economic reality.

Catch up quick: Target says it plans to cut prices and cancel orders as it tries to "right-size" its stock for the rest of the year, the company announced.

  • As a result, the company says it now expects smaller margins for the current quarter (about 2%) than previously estimated (around 5%).
  • However, Target still maintains that its operating margins for the last six months of the year will come in at a rate that exceeds pre-pandemic levels.

Flashback: Like other retailers, Target had bulked up its inventories last year to try to satisfy record consumer demand and to protect itself from ongoing supply chain issues.

State of play: The retailer is now running sales on patio furniture, kitchen equipment, and other goods for the home — the very items that for most of the last two years have been in shortest supply, Axios' Neil Irwin notes.

What to watch: Target's warning spooked investors, who sent shares of the company's stock down more than 3% as well as those of its peers, Walmart and Amazon.

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