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The
retailer said it would mark down prices in the second quarter,
cancel orders to optimize inventory, speed up parts of its
supply chain and prioritize categories such as food and
household essentials.
The company's shares, which have lost about a third of their
value since the start of the year, fell 9% in premarket trading
and dragged down the retail sector.
The surprise forecast revision is a big blow for the company,
which in May joined larger rival Walmart in reporting a much
steeper-than-expected drop in quarterly profits, sending
shockwaves through the retail industry.
Soaring inflation and higher gas prices are forcing consumers to
change their shopping habits, catching many retailers off guard
and forcing them to offer more discounts.
The retailer's strategy to keep a big portion of its products
affordable compared with its rivals is also proving to be
costly, with the company now saying it would raise prices on
some items to offset the unusually high transportation and fuel
costs.
"While these decisions will result in additional costs in the
second quarter ... (it will result) in improved profitability in
the second half of the year and beyond," Target Chief Executive
Officer Brian Cornell said.
The company now expects second-quarter operating margin to be
about 2%, compared with its prior estimate of 5.3%. It also
expects margins to be around 6% for the second half of the year,
while maintaining its sales goals for the year.
(Reporting by Aishwarya Venugopal in Bengaluru; Editing by Anil
D'Silva)
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