Target drops 8% as it cuts profit margin outlook

  • Target shares fell 8% on Tuesday after lowering its operating profit margin forecast for the second time in three weeks.
  • The retailer plans to shed excess inventory in response to developments since the first quarter.
  • Customers bought more food, beauty items and household items.

Target shares fell on Tuesday after the retailer slashed its profit margin outlook for the second time in three weeks, outlining a price-cutting plan to shift stock piling up and focus on categories seeing demand. stronger consumers.

“Since we released our first quarter results, we have continued to monitor external conditions and have determined the actions needed to remain agile in the current environment,” Target CEO Brian Cornell said in a statement.

The shares fell 7.8% during the regular session to $147.15, the lowest price since September 2020. The stock then pared the loss to 2.6%.

Target said it would take several actions in the second quarter, including conducting additional markdowns, removing excess inventory and canceling orders. It also adds capacity near U.S. ports to hold supply chain response cargo


and is working on pricing to deal with unusually high transportation and fuel costs.

Target now expects its second quarter operating margin rate to be in a range of approximately 2%. On May 18, he said he expected an operating margin rate in a wide range centered around 5.3%. Target shares plunged after the release of its first-quarter results last month that beat expectations, with results hurt by rising freight and transportation costs.

The company said it expects “continued strength” in categories including food and beverages, household essentials and beauty. Meanwhile, he sees a slowdown in sales in the home category since the start of the year. Retail customers in the United States have largely increased their home furnishings and decor purchases during the coronavirus shutdowns.

Target said for the second half of 2022, it now expects an operating margin rate of around 6%, a rate that would exceed its average fall season performance in the years before the COVID-19 pandemic. . It still forecasts full-year revenue growth in the low to mid-single digit range and expects to maintain or gain market share this year.

“While these decisions will result in additional costs in the second quarter, we believe this rapid response will pay off for our business and our shareholders over time, resulting in improved profitability in the second half and beyond,” said Cornell. .