Target Misses Sales Targets By Concerning Amount
Target has some major revenue woes on its hands. Latest projections reveal that the retail giant really missed its earnings mark.
This article is more than 2 years old
Target has been way off-target as of late. The effects of intense inflation have begun to take a toll on the behemoth retailer. This is particularly apparent in Target’s latest earnings reports as well as its future financial performance projections. Now, according to CNBC, Target is preparing its investors for some very stormy seas ahead.
Following months of surging profits and unprecedented growth, Target has made a complete 180. The retail giant has now found itself with hoards of overstock that it is unable to move and has the dismal profit margins to back it. In response to this worrisome circumstance, Target CEO Brian Cornell has asserted that he intends to “act quickly.” The CEO made specific reference to optimizing inventory and doing his best to shed the excess items that are simply taking up space.
Target has largely found itself in this harrowing position because of shifting shopping patterns. During the pandemic, the influx of stimulus cash combined with people not having to pay for things like transportation and childcare meant that individuals had extra money to spend on leisure items. As a result, Target flooded its stores with non-essential items like furniture, appliances, and TVs. Then, as inflation took hold and began to adversely affect people’s positive cash flow, those people began to make concessions and prioritize necessities over frivolous purchases. Thus, people are still buying, but they are only buying the things they need. Therein lies the foundation for Target’s current predicament. Too bad they didn’t see it coming.
It’s not just what shoppers aren’t buying that is hurting Target’s bottom line. It’s the excess capital that the company itself has to front as a result of inflation, too. The company is paying much higher fees in fuel and shipping just to get merchandise to its stores. This perfect storm of mitigating factors caused Target to miss its earnings mark by a staggering 25%.
Target isn’t the only retailer feeling inflation’s harrowing effects. It is one of many. Walmart is finding itself in an eerily similar situation as Target. Walmart also completely missed its earnings projections. And, despite being famous for its lower prices, is also finding itself jam-packed with an excess of inventory that it just can’t sell.
Thankfully, it’s not all bad news for Target. Even though the retailer is bracing itself to take a substantial blow in revenue performance during the next-fiscal quarter, it thinks it can bounce back (at least somewhat) in the latter half of the year. Target is attributing the better end-of-year projections to its plans to rid itself of inventory shoppers don’t want by heavily discounting it. It’s worth noting that other retailers, like Walmart, have similar plans. The silver lining here is that actually measures up to be some good news for the end consumer. All in all, at the end of the day Target doesn’t have it as bad as some and it will surely come out of this profits blunder largely unscathed. Kohl’s on the other hand likely has its days numbered.
