Target sent out its second profit warning in three weeks because it has too much inventory.
Target (NYSE: TGT) stock fell before the market opened after the big-box retailer issued its second profit warning in three weeks and stated that it needs to clear out a large amount of unsold inventory.
Target now expects its second-quarter operating margin to be between 2% and 3%, down from the 5.3 percent it predicted in May.It still thinks that its operating margin will get back to about 6% in the second half of the year, which it said would be better than the same quarter before the pandemic.
Target said in a statement that it “plans to do a number of things in the second quarter, such as lower prices, getting rid of extra stock, and cancelling orders.”
It will also add storage space near U.S. ports to fix the problems it has been having with its supply chain in recent months. It will also work with its suppliers to shorten distances and lead times.
The company also said it would take “pricing actions to deal with the effects of unusually high transportation and fuel costs,” but didn’t say what those actions would be.
“Even though these decisions will cost more in the second quarter, we’re sure that our quick response will pay off for our business and our shareholders in the long run, leading to higher profits in the second half of the year and beyond,” said chairman and CEO Brian Cornell in a statement.
Target stock had already dropped more than 20% when the company announced its first-quarter earnings and a profit warning last month. Before the market opened, it fell another 9%, putting it on track to open at its lowest level since August 2020.
