Target Corporation (NYSE:TGT) has reported a bigger-than-expected 90% drop in second-quarter earnings, also missing estimates for like-for-like sales in spite of making big cuts to prices for clothing, electronics and home goods.
Minneapolis-based Target posted second-quarter earnings of $183 million, or 39 cents per share, missing estimates of 72 cents, while comparable sales rose 2.6%, below analysts' estimates for a 3.3% increase.
Despite hefty discounting, the retail giant's inventory rose by 1.6% to $15.3 billion at the end of the quarter from the prior period, and its operating margin rate tumbled to 1.2% in the second quarter from 9.8% a year earlier, due to costs related to clearing out excess merchandise.
READ: Walmart raises guidance as second quarter not as bad as feared
But Target still reiterated that it would return to an annual operating margin rate of about 6%.
The increase in inventory was due to the company expediting product shipments for the back-to-school and holiday shopping periods in a still "choppy" supply chain environment, said Target chief executive Brian Cornell.
Target shares fell 5% in morning trading to $174.20 in New York.
A number of US retailers have issued profit warnings in recent weeks as consumers struggle with higher price inflation, although Target rival Walmart Inc beat Wall Street profit estimates on Tuesday and raised its guidance for the rest of the year.
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