Target is ramping up discounts. Here’s why

CNN

By Nathaniel Meyersohn, CNN Business

Target is stuck with too much home decor and too many TVs. To clear out the glut, it will ramp up discounts.

The retail giant said Tuesday that it would mark down prices on some bigger-ticket items that consumers have pulled back on purchasing and cancel pending orders from suppliers.

It’s a sharp reversal from much of the past two years, when discounts were scare and supply constraints meant consumers couldn’t often find what they wanted.

Stores and brands were able to sell merchandise at full price to consumers who had built up savings while staying home during the pandemic. They were eager to spend big on their homes and wardrobes.

But many shoppers in recent months have altered their purchasing choices in response to the fastest jump in inflation in decades and the end of federal government pandemic stimulus payments.

Consumers are making fewer high-end purchases and buying more necessities like food, household staples and self-care items.

“There is a need to clear down inventory — even if that means discounting — to rebalance stock levels and make more room” for these categories in high demand, Neil Saunders, an analyst at GlobalData Retail, said in a note to clients Tuesday.

Target was caught off guard by the speed of these shifting trends and last month told investors it would begin marking down some overstocked items.

On Tuesday, the company said it needed to respond more aggressively.

The steps will dent the retailer’s profit estimates for the year, the company said.

Heading into Tuesday, Target’s stock was down 31% for the year, and shares dropped 2% in early trading following the unexpected announcement.

Other retailers, including Walmart, Gap and Urban Outfitters, have also said they are holding too much inventory of some product lines and also plan to mark down prices and step up sales to clear the glut.

“There is a surplus of inventory … across the board at retail right now,” Urban Outfitters’ CEO Richard Hayne said last month.

Urban Outfitters will increase promotions for the remainder of the year and into the winter holiday shopping season, he said.

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