IInflation is also hitting big-box retailers like Target. The company says it is overstocked and has lowered its financial forecast. In turn, the stock is down 7.68% in premarket trading on June 7 and 31.6% year-to-date.
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To address the overstocking issue, Target said it plans several actions in the second quarter, “including additional markdowns, removal of excess inventory, and cancellation of orders,” according to a press release.
Target added that it is reviewing sales forecasts, promotional plans and cost forecasts by category. “Specifically, the company foresees continued strength in frequency categories such as food and beverage, household essentials and beauty, and plans more conservatively in discretionary categories like home, where trends have changed. rapidly since the beginning of the year.”
Based on the company’s current expectations for the economy and consumer environment, Target said it now expects its second-quarter operating margin rate to be in a range of approximately 2 %, according to the press release. That’s a staggering drop from the outlook the company released three weeks ago, when it expected its operating margin rate to be around 5.3%, according to its guidance. May 18 results report.
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Target released its first quarter results in May, which were below analysts’ expectations. The company said its “operating margin rate of 5.3% was well below expectations, primarily due to gross margin pressure reflecting actions to reduce excess inventory as well as rising costs. freight and transportation”.
“We’ve had a bit more time after earnings to really assess the overall operating environment,” Target CEO Brian Cornell said in a June 7 interview, according to The Wall Street Journal.
He said that included observing consumer behavior in the face of high inflation rates and seeing many other retailers talk about high inventory levels during their earnings presentations. “We have to be decisive and come out ahead of that to make sure it doesn’t persist into the second half of the year.”
That said, it might be time for investors to decide whether Target is a buy, sell, or hold — and for buyers to be on the lookout for bargains.
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This article originally appeared on GOBankingRates.com: Target Stock Drops After Overstocked – Should You Sell Stock or Shop Clearances?
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