Financial Analyst Warns Target Stock May Not Bounce Back As Investors Hope
If you've been paying attention to the stock market lately, you will have noticed Target investors have a bit of a situation on their hands. According to Yahoo! Finance, Target shares have decreased 29%, nearly doubling their drop rate during the S&P 500. Since June of this year, many retailers (namely Target) have been dealing with high inventory rates due to the increased prices of goods. Because inflation has gotten so high, consumers are cutting down on spending, leaving retailers like Target stuck with what FreightWaves calls "inventory bloat."
Inventory bloat happens when retailers bring in as much inventory as they can to meet the high demand from consumers; however, since the price of goods has drastically increased, consumers have put a halt to unnecessary purchases, leaving retailers sitting on thousands of dollars of unsold inventory. To combat this growing issue, Target is taking severe measures in hopes of getting rid of excess inventory.
Liquidation strategy
After much consideration, Target announced its decision to slash prices, which is great for us as consumers, but bad for Target and its investors. By significantly lowering prices, Target is attempting to get all of its stale inventory up and moving, Yahoo! Finance explains. That being said, this course of action results in a decrease in stock value for Target, causing a major loss for its shareholders. It's not just Target that's suffering, either; major big-box retailers are feeling the effects of inflation, even Amazon.
Because of this, many are cutting down on production as a means to catch up on selling the inventory they already have. According to FreightWaves, retailers like Bloomberg and Amazon have been keeping their plans of downsizing warehouse space on the hush-hush. While there is no immediate plan of action to resolve the issue, Zacks suggests cutting your losses and selling your shares; but of course, the decision is ultimately yours to make.