As a result, management envisions a second-quarter operating margin rate of 2%, down from the aforementioned 5.3%. The company plans to sell fewer products in its home categories as customers have reduced discretionary spending due to the ongoing inflation.Īctions to clear excess inventory, be it deep discounts or cancellation of orders, are likely to weigh on margins. TGT remains focused on maintaining strength in frequency categories like Food & Beverage, Household Essentials, and Beauty. It is on track to add five distribution centers in the next two fiscal years to enhance its supply-chain situation. The company is also undertaking cost-control measures, such as working with vendors to offset inflationary pressures and driving continued operating efficiencies. Also, the first-quarter fiscal 2022 operating margin contracted 450 basis points to 5.3%. Target ended up carrying high inventory in several categories, wherein the slowdown in sales was more pronounced than expected. We note that inventory rose 43% year over year in the last reported quarter. Some other notable efforts are the addition of incremental holding capacity near ports to enable supply-chain flexibility, pricing actions in a bid to mitigate high transportation and fuel costs, and working with suppliers to shorten travel time in the supply-chain process. The actions include additional markdowns, removing excess inventory and canceling orders. Target Corporation ( TGT Quick Quote TGT - Free Report) announced aggressive actions to optimize its inventory for the rest of fiscal 2022 in response to the tough operating environment, thanks to soaring inflation and changing consumer behavior.
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