Target Battles Plummeting Profits and Ballooning Inventory By Offering Rare Discounts on Clearance Merchandise
Target has started offering discounts to clear out excess items from its inventory.
The department store chain is offering extra discounts of up to 20 percent on clearance merchandise through its Circle loyalty program, Axios reported.
The offer will last through June 25 and discounts differs by store location. They are available online and at brick-and-mortar locations.
Axios found at least nine clearance offers available through the Target Circle program, the outlet reported, for clothing, shoes, swimwear and accessories.
“Many Target markdowns are between 30% and 70%,” Axios said.
The company also slashed prices on patio furniture, kitchen equipment and other home goods, reporter Neil Irwin found.
The report of the clearance discounts came after a June 7 news release from the Target Corporation in which the company announced it would embark on a series of actions to “right-size” its inventory.
“The Company is planning several actions in the second quarter, including additional markdowns, removing excess inventory and canceling orders,” Target Corporation announced.
The company also mentioned that it expected lower profit margins at around 2% in the second quarter.
“For the back half of the year, Target now expects an operating margin rate in a range around 6%, a rate that would exceed the Company’s average Fall season performance in the years leading up to the pandemic,” the company said.
The Target clearance offers come as record-high inflation in the country has lowered consumer demand for retail goods.
Last quarter, the company experienced a decline of 52% in profits, Axios reported.
The Department of Labor reported Wednesday that retail spending in the U.S. fell by a seasonally-adjusted 0.3% in May, reversing a five-month streak of gains in the key indicator.
Americans spent less on furniture, electronics, vehicles, appliances, and health and personal care products in May, according to the Labor Department.
The numbers proved to be a cause of worry for the country since a persistent decrease in demand could significantly harm the U.S. economy. Economists estimate that 70 percent of economic activity in the country is tied to consumer spending.
“Retail sales are reflecting Americans’ growing concern about inflation and its impact on the cost of everything from groceries to gas,” National Retail Federation President and CEO Matthew Shay said in a news release. “Retailers are doing what they can to keep prices down, but we continue our call on the administration to repeal unnecessary and costly tariffs on goods from China to relieve pressure on American consumers and their family budgets.”
“There’s been little relief from inflation, and we expected some cooling off in sales in reaction to prices,” NRF Chief Economist Jack Kleinhenz added. “There have been swings across sectors that reflect the impact of both higher prices and supply chain disturbances, and higher interest rates are expected to curb spending going forward.”
“As inflation continues, consumers are looking for ways to stretch their dollars by saving less, tapping into savings accumulated during the pandemic and increasing their use of credit,” Kleinhenz said.
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