Target's quarterly earnings report surprised investors on Wall Street Wednesday, who saw data showing that the popular U.S. retailer saw profits plunge nearly 90% as the company tried to offload pilled-up inventory amid red hot rising inflation while facing wary U.S. shoppers.
Executives said their actions have been necessary, albeit tough, to put the company in a stronger position for the remainder of the year, the New York Times reported.
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Net profits for the company nose-dived to $183 million during a three-month window ending on July 30, shocking Wall Street despite previous warnings that the company had over-ordered, creating an excess inventory environment that executives had to find a way to sell.
Target was bloated with $15.3 billion in inventory, which was a 36 percent increase from the year before.
Brian Cornell, CEO of Target, told investors on a Wednesday call that the environment for retailers like his company remains "challenging," CNN Business reported.
Cornell reassured that the company, though, is witnessing "an encouraging start to the back-to-school" shopping period.
Christina Hennington, Target's chief growth officer, said she was "encouraged" by how gas prices in the U.S. have decreased a bit. She said that the company hears from customers who say "they still have spending power, but they’re increasingly feeling the impact of inflation.”
Issues like these appear to be affecting retailers like Target more, while rival Walmart still gains a greater market share to shoppers buying essentials like groceries. Target still focuses more on items that are more discretionary.
