Target heavily discounted merchandise to clean up inventory

Photo: Joe Raedle/Getty Images

This summer’s discounts at Target will last a little longer.

Driving the news: The Minneapolis-based retailer reported a 90% drop in profits during the second quarter as inventory is eliminated, either through discounts or cancellations of orders.

The big picture: Target’s second-quarter performance shows how difficult it has been for the average retailer to operate during the pandemic, writes Hope King, author of Axios Closer.

  • The rapid economic recovery from the pandemic has given businesses little time and space to adapt first to logistical challenges and, more recently, to changing consumer preferences.

Why it matters to you: You can find deals in home decor, furniture, small appliances, and clothing.

Yes, but: Target plans to eliminate excess inventory by the end of October, with prices returning to normal this winter, CEO Brian Cornell said during a earnings call Wednesday.

  • Target expects earnings to rebound over the next six months as most inventory clearance costs have been paid.

Between the lines: Target could have simply held on to inventory and sold it slowly, but chose to be more aggressive.

  • An overabundance of inventory clutters sales floors, interrupts workflow and prevents fashion shelves from carrying the freshest items, Cornell explained on the call.

What to watch: Target said back-to-school and college shopping is currently looking “encouraging” ahead of the all-important holiday season Halloween in the latter part of the year.

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