Target plans to shed inventory as consumer demand shifts elsewhere

Target is getting out ahead of a big problem: unwanted inventory. Yesterday, the big-box retailer warned profits could take a hit in the short term as the company executes a plan to do away with excess stuff.

It’s gotta go: CEO Brian Cornell told CNBC that Target plans to make room for in-demand inventory like groceries, beauty products, household items, and back-to-school supplies, and shift away from popular pandemic-era categories.

• The plan entails slashing prices and canceling orders for those unwanted items.

Billions of dollars in excess inventory are plaguing a handful of retailers, including Walmart and Gap, as a result of stocking up on products amid supply-chain shortages from late last year, Suzy Davidkhanian, principal analyst at Insider Intelligence, told Retail Brew. She noted, however, retailers being stuck with too much product is hardly a new problem.

“People are making different decisions about where they’re going to spend their money, and so retailers need to sort of get ahead of it and have the right merchandise at the store or online for when the consumer is ready to make that purchase,” Davidkhanian said. “It’s always been a little bit of a dance, but I think it’s just exacerbated because consumers are making changes much more quickly.”

Looking ahead…For Target—and other retailers—Davidkhanian said it’s important to use predictive analytics to forecast future demand. Cornell told CNBC Target wants to get out ahead of seasonal shopping periods like back to school and the holidays to avoid overstocked stores.

• Target predicts its profit margins in the latter half of the year will still exceed pre-pandemic levels at 6%.

“I don’t think there’s less demand; people are still shopping,” Davidkhanian said. “They’re just buying different things.”

TL;DR: Got a minute? Dan Toomey summed up Target’s oversupply season in a video here.—KM