Target announces measures on inventory optimization – Check updated plan

Target Corporation has announced a set of actions to right-size its inventory and create additional flexibility to focus on customers in a rapidly changing environment.

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Target now expects its second-quarter operating margin rate will be in a range around 2 per cent.

Target stock price saw volatility after the company announced new measures to tackle inventory levels in line with changing trends with US consumers. The share price of Target Corporation, a retail giant, closed at $155.98 down by almost 2.31 per cent on Wednesday. Inflationary pressures, supply crunch and cost increases are getting more visible than before.

Target Corporation (TGT) announced a set of actions to right-size its inventory for the balance of the year and create additional flexibility to focus on serving guests in a rapidly changing environment.

These actions are intended to further build on the Company’s record of growth and market-share gains.

The Company is planning several actions in the second quarter, including additional markdowns, removing excess inventory and canceling orders.

Major steps being taken by Target Corporation includes:

The action plan also includes the addition of incremental holding capacity near U.S. ports to add flexibility and speed in the portions of the supply chain most affected by external volatility

Pricing actions to address the impact of unusually high transportation and fuel costs

Working with suppliers to shorten distances and lead times in the supply chain.

Company is further accelerating work that’s already in flight, including rapid revisions to sales forecasts, promotional plans and cost expectations by category.

Company is planning for continued strength in frequency categories like Food & Beverage, Household Essentials and Beauty, and is planning more conservatively in discretionary categories like Home, where trends have changed rapidly since the beginning of the year.

The Company is also pursuing aggressive options to control costs, including ongoing work with vendors to help offset inflationary pressures, driving continued operating efficiencies, and reducing costs while preserving a strong guest experience.

Finally, the Company continues to build additional capacity in the Company’s upstream supply chain to support its future growth by adding five distribution centers over the next two fiscal years.

Guidance Updates

Target now expects its second-quarter operating margin rate will be in a range around 2%. 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 continues to expect full-year revenue growth in the low- to mid-single digit range, and expects to maintain or gain market share in 2022.

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