Targeted cancellation of orders, lowering prices to clear accumulated inventory

NEW YORK – Target is canceling orders from suppliers, particularly for housewares and clothing, and slashing prices to clear accumulated inventory ahead of the critical fall and holiday shopping season.

The measures come after a marked shift in spending by Americans, from investing in their homes to spending money on travel, dining out and dressier clothes, a shift that has come much faster than big retailers anticipated.

The speed at which Americans are turning their backs on pandemic spending has been revealed in the latest quarterly financial documents from a number of major retailers. Target reported on his last month Profit slumped 52% in the fiscal first quarter compared to the same period last year. Sales of big TVs and gadgets, which Americans have been charging during the pandemic, have slacked, leaving Target with a bloated inventory that it said needs to be reduced to sell.


Target declined to provide a dollar amount for canceled merchandise orders and the size of the rebates.

Other retailers such as Gap, Macy’s, Walmart and Kohl’s have also reported rising inventories.

“Retail inventories are elevated,” Target chief financial officer Michael Fiddelke told The Associated Press in a phone interview Monday. “And they’re certainly an opportunity for us in some of the categories that we mispredicted to move the business forward.”

Target is working with suppliers to recover the costs of their suppliers whose orders are being cancelled. In some cases, some of the raw materials that were intended for some goods are instead used for other higher-demand products, Fiddelke said. Many of the orders for products that are being canceled have long production lead times of nine months, he said.

Target said costs related to the moves will hurt its bottom line in the current quarter. Target now expects its second-quarter operating margin to be about 2%, down from about 5.3% last month. For the second half of the year, Target expects an operating margin rate in the region of about 6%, a rate it says would beat the company’s average fall season performance in the years leading up to the pandemic.


Last month, Target Corp. forecast that its full-year operating margin would be in the region of 6%. Target didn’t provide a new prediction for the entire range.

However, Target still expects full-year sales growth in the low- to mid-single digits and expects to maintain or gain market share for the year.


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Sarah Y. Kim

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