US retailers face overstocking! Target cuts prices to clear inventory in preparation for peak sales season!

It is learned that Target's inventory was close to $15.1 billion on April 30, which is about 43% higher than the same period last year. Target is currently canceling orders from suppliers, especially orders for home furnishings and clothing, which have weak demand, and further lowering prices to clear out excess inventory before the critical fall and holiday shopping seasons.

Target cuts prices to clear inventory in preparation for peak sales season

Target's profit in the first quarter was cut by 52%. On June 7, Target said that its profit will continue to be impacted in the short term, and Target will take price cuts to boost sales and reduce excess inventory. Due to large-scale discounts and clearance of goods, the retailer also lowered its profit margin expectations for the second quarter. The stock price closed at $155.98 that day, down 2.31%.

While actively clearing inventory, it is also making room for seasonal products in some high-demand categories such as groceries, beauty products, household essentials and back-to-school products. These products have been in short supply for most of the past two years. Target currently has strong traffic online and in its offline stores, but these consumers are no longer buying categories that were in high demand during the pandemic.

At the same time, Target is also facing the challenge of sharply rising costs for everything from labor to transportation and shipping, and Target has said it may raise prices on some products to offset the impact of deep markdowns.

Q2 and second half financial outlook

Target also announced that it will add five distribution centers in the next two fiscal years. Target expects its operating profit margin in the second quarter to be around 2%, which is lower than the 5.3% forecast given last month. Target expects its profit margin in the second half of the year to be around 6%, better than the average performance in the years before the outbreak. It is expected that the revenue growth for the whole year of 2022 will remain in the low-to-mid single digits, and it will maintain or increase market share in 2022.

Target's Q1 results fell sharply due to a sharp increase in fuel and freight costs, which caused its stock price to fall by nearly 25%, making it the company's worst day on Wall Street. Walmart's Q1 results also failed to meet profit expectations.

U.S. retailers face overstocking

It is learned that Target, Gap, Walmart and other large retailers rushed to stock up large amounts of inventory at the beginning of the outbreak, and now the excess inventory has reached 45 billion US dollars, an increase of 26% over the same period last year. Retailers from Walmart to Gap are currently facing the embarrassing situation of overstocking, among which Walmart's inventory level has increased by about 33%. Abercrombie & Fitch and American Eagle Outfitters both reported a sharp increase in inventory levels, up 45% and 46% respectively from a year ago, due to reduced spending caused by inflation, weak demand for goods and easing of supply chain disruptions. Gap said that consumer demand has shifted from casual clothing to party dresses and formal wear.

Editor ✎Estella/

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