Target has announced that it will cut prices and cancel orders for thousands of its products, as part of a frantic effort to clear out billions in backed-up inventory.

The spending shift by Americans arrived much faster than major retailers had anticipated, from investments in their homes to money spent on travel, nights out for dinner, and dressier clothes.

The Bureau of Labor and Statistics continually reports a drop in remote workers, and many Americans have reduced spending on items such as televisions, small appliances, and furniture.

The change occurred much faster than most major retailers had anticipated. Recent quarterly financial filings from several major retailers exposed the major shift in spending. 

The speed at which Americans have moved away from pandemic-related spending has been laid bare in the latest quarterly financial reports from a number of major retailers.

Target announced last month that its profit for the first fiscal quarter fell 52% from the same period last year. Sales of big TVs and small kitchen appliances that Americans loaded up during the pandemic have faded, leaving Target with a bloated inventory it says needs to be cut to sell.

Target declined to give a dollar amount of merchandise orders that are being canceled and the depths of the discounts.

Michael Fiddelke, Target’s chief financial officer said in a statement Monday:

“Retail inventories are elevated. And they certainly are for us, in some of the categories that we misforecast. We determined that acting aggressively was the right way to continue to fuel the business.”

More details of this report from The Gateway Pundit:

The nation’s top retailers have watched their inventories significantly expand due to shipping delays caused by the COVID-19 pandemic. The delay in receiving goods has now outpaced the rate at which consumers are purchasing those goods. The result is excess inventory, which coupled with reduced spending creates a significant issue for most retailers nationwide. 

According to a Bloomberg report, a 26% increase in inventories since last year has added up to $44.8 billion between S&P consumer indexes with a market value of at least $1 billion and reported earnings in the previous two weeks. 

Target reported a 43% increase in inventory, Walmart reported a 32% increase, Macy’s reported a 17% increase, and Costco reported a 26% increase.

These large retailers now face rising costs in storage fees or having to issue significant discounts to make room for more inventory. Discounts could be especially difficult for businesses, given the steep rise in inflation. This means a rising cost of goods for consumers to account for the increased cost of managing and storing inventories for the companies. 

This will most likely impact the American consumer directly, staying in line with the 40-year record inflationary rates in consumer pricing and wholesale goods. 

It is worth noting that excess inventories typically signal a recession or overall economic downturn. Goldman Sachs has predicted a 35% chance of a recession in the next two years, while a Wells Fargo model projects a 30% chance of a recession occurring in the next six months. The prolonged impact of the pandemic on the financial markets has yet to be realized.

Shares of Target Corp. fell 9% to $145.30 in premarket trading Tuesday and the stock of other retailers retreated with it. Walmart, Nordstrom and Macy’s fell between 2% and 4%.

Sources: TheGatewayPundit, Bloomberg

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