Target said it will take a short-term hit from markdowns, but wants to clear room for groceries, back-to-school supplies and other items consumers want.
Target's high inventory warning is just getting in front of the problem, says Jefferies' Wissinkwarned investors Tuesday that its profits will take a short-term hit, as it marks down unwanted items, cancels orders and takes aggressive steps to get rid of extra inventory.
The retailer slashed its profit margin expectations for the fiscal second quarter to account for a wave of goods winding up deeply discounted or on the clearance rack.
Shoppers walk in front of a Target store at the Lycoming Crossing shopping plaza in Muncy, Pennsylvania.By taking swift action, Cornell said Target can fend off further pain and make room for merchandise that customers do want, such as groceries, beauty items, household essentials and seasonal categories like back-to-school supplies.
Target anticipates its operating margin rate for the second quarter will be around 2%. That's lower than the outlook it gave less than three weeks ago, when it anticipated its operating margin rate would be roughly around its first-quarter operating margin rate of 5.3%. In the back half of the year, Target anticipates profit margins will be in a range around 6% — better than its average performance for the fall season in the years before the pandemic began. The company said it still expects revenue growth to be in the low to mid single digits for the full year and to maintain or gain market share in 2022.
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