Target cutting prices to lower inventory as shares fall

(NewsNation) — Target executives recently announced the company is slashing prices to cut down on inventory, a move that will affect its bottom line in the coming fiscal year.

In an interview with the local Star Tribune, Michael Fiddelke, Target’s chief financial officer, said the Minneapolis-based company has been assessing the broader retail environment.

“It’s no secret right now based on what’s been reported, the level of inventory across all retail is pretty high,” he told the newspaper.

According to the Star-Tribune, there could be price drops on TVs, outdoor furniture and kitchen appliances as Target tries to get rid of them to make way for better-selling merchandise.

While demand for these items was high during the pandemic, their popularity has fallen significantly in recent months. This excess inventory takes up a lot of space in stores and warehouses.

Target wants to make room for what is now in demand, such as groceries and makeup products. But it will still face sharply higher costs when it comes to labor, transportation and shipping.

“Retail inventories are elevated,” Fiddelke told The Associated Press in a phone interview. “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.”

In addition to lower prices, additional markdowns, canceling orders from suppliers, and removing excess inventory are also all in Target’s game plan, a news release said. Target is working with supplies to cover costs for vendors whose orders are being canceled. Some of the raw materials meant for less in-demand goods will be used for more popular ones.

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

Because of the inventory cutting, and Target’s current expectations for the economic environment, the company expects its second-quarter operating margin rate to be in a range around 2%, with an expected 6% operating margin for the back half of the year.

Shares of Target Corp. fell 9% to $145.30 in premarket trading Tuesday and the stock of other retailers retreated with it. Walmart, Nordstrom and Macy’s fell between 2% and 4%.

Target reported last month that its profit for the fiscal first quarter tumbled 52% compared to the same period last year.

The Associated Press contributed to this article.

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