- Target announced a plan to offload excess inventory and cut its Q2 profit-margin forecasts.
- The stock had dipped more than 4% as of Tuesday afternoon as a result.
- Target said it will put more items on sale and cancel orders to clear space for in-demand products.
Get ready for more sales at Target.
The retailer announced Tuesday that it's taking steps to deal with excess inventory, including markdowns, clearing out extra products, and canceling orders. Target cut its profit-margin forecasts for the fiscal second quarter as a result, sending shares down more than 4% as of Tuesday afternoon.
CEO Brian Cornell said in a statement that Target has been monitoring consumer buying behavior amid the current economic climate and opted to act now in order to "remain nimble."
"While these decisions will result in additional costs in the second quarter, we're confident this rapid response will pay off for our business and our shareholders over time, resulting in improved profitability in the second half of the year and beyond," Cornell said.
Target plans to focus on merchandise that remains popular with customers — items like beauty products, household essentials, and back-to-school supplies — while offloading goods that shoppers no longer want, like home goods or cumbersome patio furniture, which Target worked to clear out with a sale during Memorial Day weekend, Cornell told CNBC's Melissa Repko.
Target warned during its fiscal first-quarter earnings in May that it was dealing with a glut of inventory in "bulky categories" like kitchen appliances, TVs, and outdoor furniture, Cornell said during a conference call with investors.
"While we anticipated a post-stimulus slowdown in these categories, and we expect the consumers to continue refocusing their spending away from goods and services, we didn't anticipate the magnitude of that shift," he said.
But Target isn't the only retailer experiencing whiplash: Walmart, Kohl's, Gap, American Eagle, and Urban Outfitters reported during their recent earnings calls that inventories were up significantly compared to a year ago as pandemic-era products languished on shelves.
Which means that retailers are stuck with too many products and only two options for what to do with it all: pack it up and hold it for next year, or put it on sale.
As Insider previously reported, some of those discounts likely won't go into effect until later this year, given lingering supply-chain challenges for several retailers. But others are already clearing the way for in-demand goods — which means shoppers should prepare for more products shuffled to the sale rack.
Do you work at Target? Do you have a tip to share? Contact Insider senior reporter Avery Hartmans by email ([email protected]) or Twitter DM (@averyhartmans).