Top U.S. Retailer Target Cuts Quarterly Profit Forecast

Target Corp. lowered its quarterly profit margin prediction made just weeks ago on Tuesday and said it will have to offer bigger discounts to clear inventory as decades of rising inflation take a toll on demand, Reuters reported.

Photo Insert: Target and Walmart both reported a considerably steeper-than-expected decrease in quarterly profit in May, shocking the retail industry.

Target's stock fell over 7% in early trade after the unexpected projection reduction, weighing on the retail sector and broader markets. In the second quarter, the retailer said it would lower prices, cancel orders with suppliers, reinforce areas of its supply chain, and emphasize categories like food and household items.

Consumers are changing their shopping patterns as a result of rising inflation, which has caught many shops off guard and forced them to provide greater discounts.

Target and Walmart both reported a considerably steeper-than-expected decrease in quarterly profit in May, shocking the retail industry. Target reported at the time that inventories increased 43 percent year over year as demand for high-margin discretionary items like kitchen appliances and televisions declined.

"Target was a retailer that had done exceptionally well at managing inventory challenges, but now when consumers ... are pausing to see where they're spending, what was once an advantage may come back to bite," Jane Hali & Associates analyst Jessica Ramirez said.

Target's policy of keeping most of its products low in comparison to competitors is backfiring, with the retailer now announcing that it will hike prices on some items to offset abnormally high transportation and gasoline expenses.

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