Target, the leading US retailer, is cancelling orders of home textiles and apparel from suppliers, and is slashing price to clear out amassed inventory ahead of the critical fall and holiday shopping seasons.
As per media reports, the actions come after a pronounced spending shift by Americans, from investments in their homes to money spent on travel, nights out for dinner and dressier clothes– a change that arrived much faster than major retailers had anticipated.
Associated Press quoted Michael Fiddelke, Target’s CFO, “Retail inventories are elevated and they certainly are for us, in some of the categories that we misforecast. We determined that acting aggressively was the right way to continue to fuel the business.”
Target declined to give a dollar amount of merchandise orders that are being cancelled and depths of the discounts.
The retailer is working with suppliers to cover costs for their vendors whose orders are being cancelled. In some cases, some of the raw materials that were meant for some goods will instead be used for other products in higher demand.
Many of the orders for products being cancelled have a long production lead time of 9 months.
Target said the costs related to the moves will hurt the bottom line in the current quarter. The retailer expects its Q2 operating margin rate to be around 2 per cent, down from around 5.3 per cent it had expected last month.
It has been said that retailers like Gap, Macy’s, Walmart and Kohl’s have also reported rising inventories.
