Why Major Kitchen Appliance Deals May Be Coming To Target
Planning to buy a stand mixer, or have you been shopping around for coffee makers? If so, you may want to keep an eye out for upcoming sales at Target. The retail chain will soon be discounting many of its home and kitchen appliances, as well as furniture and TVs. Target Chief Financial Officer Michael Fiddelke explained to the Star Tribune that the company currently has a surplus in inventory due to a drop in demand for home goods. According to quarterly numbers announced in May, inventory went up 43% from February to April, and that means Target's warehouses and stores are becoming unreasonably full.
With shares dropping to 7% (per Star Tribune), Target has decided to shift its focus to prioritizing its best-selling items, which currently are the food, household essentials, and beauty departments. Instead of sitting on excess inventory, Target will be lowering its prices to make way for the kinds of products its consumers actually want to buy. "We got more of that product than we want to have, and we think dealing with that head-on by being aggressive now positions us with the right flexibility for the back half of the year," Fiddelke shared with Star Tribune of the decision.
Target is settling for a lower profit margin to keep customers happy
Target may be cutting its losses by discounting its excess inventory, but CEO Brian Cornell told CNBC that it's the only way to see any sort of profit while also retaining customers and investors. "We thought it was prudent for us to be decisive, act quickly, get out in front of this, address and optimize our inventory in the second quarter — take those actions necessary to remove the excess inventory and set ourselves up to continue to be guest relevant with our assortment," Cornell explained in the interview with CNBC.
In making its in-store experience "guest relevant," Target expects its profit margin will temporarily drop to 2% (per Reuters). Once the excess inventory has depleted, business is anticipated to return to normal. By the later half of the year, Target foresees profit margins will recover and reach 6%; higher than its pre-pandemic rate (per CNBC). So while the company's profits will be down initially, the decision to slash prices on inventory will ultimately end in a win for both Target and its customers.