The US economy has had its share of ups and downs, even the Target department store chain has been hit hard.

Target sales report

Target recently reported positive sales for its second fiscal quarter.

However, the chain’s profits plummeted nearly 90% as it was forced to cut prices on items like clothing, homewares and electronics to liquidate inventory.

Two months ago, Target issued a warning that it was canceling supplier orders while aggressively cutting prices.

His decision was based on how Americans’ spending changed as the pandemic slowed. In the meantime, the target shares decreased by almost 4%Wednesday.

The retailer lost the Wall Street expectations with a considerable area, even after Target had cut the pipeline twice.

Projection

Despite the relationships, the goal of the forecasts for the entire year is. The company is convinced that it is positioned for a rear border.

Target also provides for the growth of sales of the year as a whole with individual low to media data.

The company said its operating margin will be in the 6% range in the second half of 2022.

A 6% transaction would be a leap from an operating margin of 1.2% in the second fiscal quarter.

Shift in spending

Retailers have been caught off guard by customer abandonment from buying TVs and small kitchen appliances, eating out, going to the movies and traveling.

The change also coincides with the increase in inflation.

In the first quarter, Target’s profits fell 52% compared to the same period a year ago. Net income

Target reported a second quarter net profit of $ 183 million for the three months ending July 30.

The numbers are lower than Wall Street’s projected earnings per share of 79 cents.

Net income was also below the $ 1.82 billion goal achieved in the same period last year.

Revenues increased 3.5% to $ 26.04 billion, from the $ 26.03 billion analysts had expected.

Comparable store sales of the target store also increased 1.3%, plus 8.7% year-over-year growth, and online sales increased 9% from 9.9%. % in 2021.

Executives

“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,” said Brian Cornell, CEO of Target.

During a media call, Target executives shared with reports that Target would have taken multiple quarters to unload unwanted goods had the company not taken its aggressive approach to reducing inventory.

For the rest of the year, including critical holidays, the company is planning cautiously, according to Cornell.

The plans focus on storing groceries and other items such as cosmetics. Target’s Chief Growth Officer and Executive Vice President said the company is listening carefully to customers’ wishes, needs, hopes and concerns.

“They still have purchasing power, but they are increasingly feeling the impact of inflation,” Hennington said during a conference call on Wednesday.

“While recent gas pump price cuts have been encouraging, guests’ confidence in their personal finances continues to decline.”

Inflation effect

Due to inflation, customers seek out the cheapest private label brands from Target and wait for discounts and consolidate trips to save on gas bills.

The company is sticking to its previous full-year revenue growth forecast at a low to medium to single-digit percentage.

Target also expects an operating margin of over 6% in the second half of the year, up significantly from 1.2% in the last quarter.

References:

Target takes a hit after heavy discounts to clear inventory

Target’s earning take a huge hit as retailer sells off unwanted inventory