Target Issues Second Profit Warning in Three Weeks on Inventory Overhang
2022.06.07 14:42
By Geoffrey Smith
Investing.com — Target (NYSE:TGT) stock slumped in premarket trading after the big-box retailer announced its second profit warning in only three weeks, admitting that it needs to cut down a mountain of unsold inventory.
Target now expects its second-quarter operating margin rate will be in a range around 2%, rather than the 5.3% it forecast as recently as May 18. However, it still expects operating margin to recover to around 6% in the second half of the year, which it said would be better than the comparable quarter prior to the pandemic.
Target said in a statement that it is “planning several actions in the second quarter, including additional markdowns, removing excess inventory and canceling orders.”
It will also add holding capacity near U.S. ports to relieve the problems it has had with its supply chain in recent months and will work with suppliers to shorten distances and lead times.
The company also promised “pricing actions to address the impact of unusually high transportation and fuel costs”, without specifying further.
“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,” said chairman and chief executive officer Brian Cornell in a statement.
Target stock, which had cratered over 20% when it issued a profit warning along with its first quarter results last month, fell another 9% in premarket, putting it on course to open at its lowest since August 2020.
