Target’s excess inventory issues are cutting into quarterly profits.
“[Target] continues to grow traffic and sales while delivering broad-based unit-share gains in a very challenging environment,” he said. “I want to thank our team for their tireless work to deliver on the inventory rightsizing goals we announced in June. While these inventory actions put significant pressure on our near-term profitability, we’re confident this was the right long-term decision in support of our guests, our team and our business.
But investors didn’t seem convinced. Shares of Target fell by more than 3 percent at the start of Wednesday’s session. The retailer said it still expects full-year revenue growth in the low- to mid-single digit range, compared with last year’s results, and is anticipating an operating margin rate around roughly 6 percent in the back half of the year, year-over-year.
The company has also temporarily secured storage containers near ports and moved to earlier receipt dates for season inventory in an attempt to rely less on airfreight moving forward. The firm is anticipating an impact of roughly $200 million in the current quarter from inventory reductions.
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