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Target warns of weaker margins again as inflation curbs consumer spending -Breaking


© Reuters. FILE PHOTO – A shopping cart can be seen at Target in Brooklyn, New York on November 14, 2017. REUTERS/Brendan McDermid

(Reuters) – Target Corp (NYSE 🙂 cut Tuesday its quarterly margin forecast just weeks ago and announced that it would need to stock more necessities and offer greater discounts as inflation continues to impact consumer spending.

Surprise Forecast revision for Walmart is a huge blow. It joined Walmart’s larger competitor Walmart (NYSE) May in reporting a dramatic drop in quarterly profit. The news sent shockwaves throughout the retail industry.

Inflation is on the rise and gas prices are rising. Consumers have changed their shopping habits and many retailers have had to adjust.

Target stated that it will concentrate on clearing out excess inventory during the second quarter and cancelling orders to speed up supply chains which could be affected due to “external volatilities”.

Additionally, the company prioritises categories like food and drink and household necessities over more discretionary products such as homeware.

Target’s plan to make a large portion of its products more affordable has been costly. Target now says it will raise prices in order to compensate for unusually high fuel and transportation costs.

Target Chief Executive Officer Brian Cornell explained that although these actions will increase costs in the quarter to come, it will lead to increased profitability over the next half year.

Now, the company expects its second-quarter operating profit to reach 2%, down from 5.3% as previously estimated. In the second quarter, margins are expected to average around 6% while the company maintains its goals for sales.

Target stock lost around a third this year.