Target Corp.'s chief executive on Wednesday addressed the retailer's decision to unload excess merchandise at steep discounts in recent months, defending the move he says places the company in a better position moving ahead by tackling inventory woes head-on.
Target's profits plunged 89% in the second quarter due to inflation limiting consumer spending and a pileup of inventory blamed on supply chain problems.
CEO Brian Cornell reminded investors during an earnings call following the results that the company warned in June that profits would take a short-term hit from implementing additional markdowns to aggressively move excess merchandise.
"While this decision had a meaningful short-term impact on our financial results, we strongly believe it was the best path forward," Cornell said.
"Consider the alternative, we could have held on to excess inventory and attempted to deal with it slowly over multiple quarters or even years," he continued. "While that might have reduced the near-term financial impact it would have held back our business over time."
Cornell said keeping the extra inventory for longer would have worsened the ongoing burden on the company's supply chain.
He added, "the high-level story is the vast majority of the financial impact of these inventory actions is now behind us."