Target reported solid sales in the second quarter of the fiscal year, but Profits plummeted by nearly 90% after being forced to cut prices and unnecessary inventory of clothing, home goods and other discretionary items.
In early June, Target warned that as the pandemic eased, changes in spending by Americans became noticeable, prompting it to cancel orders from suppliers and aggressively cut prices. .
Shares fell more than 2% in Wednesday's pre-market trading.
"Target said it invested in fast-growing frequency categories while reducing inventory exposure in discretionary categories." Vital Knowledge equity analyst Adam Crisafri said in a note.
Retailers were caught off guard by the lightning-fast shift in spending from household items such as televisions and small kitchen appliances to dining out, movies and travel. Added to that change is the sharp inflation. Target's profit in the first quarter fell by 52% compared to the same period last year.
Target reported net income for his three-month second quarter ended July 30 at $183 million, or 39 cents per share. This is down from $1.82 billion, or $3.65 per share, in the year-ago quarter. Analysts had expected 79 cents per share, according to FactSet.
Revenue increased by 3.5% to his $26.04 billion. Analysts expected him to make $26.03 billion, according to FactSet.
store-to-store sales increased his 1.3% on top of his 8.7% growth last year. Online sales increased by 9%, following last year's 9.9% growth.
"While these inventory tasks will put significant pressure on our immediate profitability, we are confident this was the right long-term decision to support our guests, team and business. said CEO Brian Cornell.
Target executives told reporters on a conference call with the media that it would have taken at least several quarters to get rid of unneeded merchandise had Target not aggressively lowered its inventory.
Cornell said the company is planning carefully for the rest of the year, including the important holiday season. This will shift the focus to inventory such as groceries and cosmetics.
The company is sticking to its previous guidance for full-year revenue growth in the low to mid-single-digit percentage range. He also expects an operating margin of about 6% in the second half, up from 1.2% in the most recent quarter.
Walmart, America's largest retailer, reported on Tuesday that second-quarter sales and profits increased by. High-income shoppers flock to discount stores to save on groceries, while low-income shoppers, feeling pressured by rising inflation, are switching from deli meats to hot dogs and canned tuna.
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