Updated at 1:44 pm EST
Get Target Corporation Reportshares fell Thursday after the retailer increased its quarterly dividend just days after warning that excess inventories and increased input prices would slash near-term profit margins.
Target said it would pay a quarterly dividend of $1.08 per share, a 20% increase from its previous payout, on August 17, according to Target.
Earlier this week, Narget said that its higher-than-expected 35% build-up in overall inventories would likely result in price cuts, ajouting that additional discounts would be required to shift excess goods, adding that operating margins would be narrowing to 2% in the current quarter before returning to the second half of the year.
Target stock in the past three decades fell the most, mainly because it focused on freight and fuel costs, and their impact on near-term margins, indicating that the combined increase would be worth $1 billion.
While the retailer''s efforts to halt inflation and gain efficiency in its ordering and transport systems would "result in additional costs in the second quarter," CEO Brian Cornell said he was confident that this "rapid response will pay off for our business and our shareholders over time, thus boosting profitability in the second half of the year and beyond."
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Following a dividend boost to change hands at $156.47 each, Target''s stock was marked 0.15% lower in early afternoon trading, a move that would leave the stock with a year-to-date decrease of 32.5%.
The S&P 500 Retailing Group has dropped by around 24% this quarter, achieving its worst performance since 1990, as investors expect more stress from the Federal Reserve''s rate-based inflation fight and the highest nominal domestic gas prices on record, which continue to dwindle household budgets and discretionary expenditure.
According to Citigroup analyst Paul Lejuez, average retail inventories in the United States are outpacing sales increases by about ten percent, the largest gap since the epidemic, as retailers struggle to handle supply chain disruptions, fuel and freight costs, and rapidly changing consumer habits.
The results from Macy''s (M) - Get Macy''s, Inc. Reportand Nordstrom (JWN) - Get Nordstrom Inc. Report both showed significant increases in demand for spring and summer dresses.
Larger, more diverse retailers may jeopardize shipments due to their desire to get in front of supply chain snarls, but this might result in increased price reductions for inflation-harmed customers.
