Target Stock Drops on Inventory Purge. Walmart, Other Retail Stocks Fall, Too.
shares were getting hammered on Tuesday after the retailer said its lowering prices further and cutting its profit outlook for the second time in almost three weeks as it plans markdowns to get rid of unwanted inventory. The news was so bad that shares of other retailers, including
(AMZN), were falling too.
The company said it’s trying to right-size its inventory for the remainder of the year by canceling orders from suppliers and furthering marking down items. It’s also working with suppliers to shorten distances and lead times in the supply chain to address unusually high transportation and fuel costs.
As a result, Target now expects an operating margin for the second quarter to come in around 2%, a drop from its expectation in mid-May for a profit margin of around 5.3%.
Target has determined the necessary actions to remain nimble in the current environment, said CEO Brian Cornell. While it will result in additional costs in the second quarter, there will be improved profitability in the second half of the year and beyond, he added.
Target said for the remainder of the year, the operating margin rate will be around 6%, higher than its average fall season performance prepandemic. Target maintained its full-year revenue growth outlook for the full year in the low- to mid-single-digit range.
Investors, however, weren’t willing to see the glass as half full. Target’s stock has fallen 9.1% to $145.10 on the news in Tuesday’s premarket trading. Not only that, investors extrapolated from Target to other retailers, whether because they may have their own inventory problems or because they’ll have to compete with Target’s markdowns. And that makes sense if you believe Target’s explanation for the announcement. “All of the actions announced today are the result of the Company’s ongoing assessment of current industry performance, the operating environment and consumer trends,” Cornell said in the press release, while also noting that the moves are intended to “further build on the Company’s record of growth and market-share gains.”
Among traditional retailers,
stock has fallen 3.5%, while
(COST) has declined 3.3%, and
(M) has slipped 2.8%. And even internet retailers were feeling some of the pain as
(AMZN) has fallen 2.4% and
(SHOP) has dropped 2.8%.
So much for the end of the retail wreck.
Write to Karishma Vanjani at firstname.lastname@example.org