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By Siddharth Cavale and Arriana McLymore
NEW YORK, July 22 (Reuters) - Target Chief Executive Officer Brian Cornell pledged in a June blog post https://investors.target.com/news-releases/news-release-details/target-corporation-announces-updated-2022-plan-focused-inventory that the retailer would take necessary actions to adapt to a post-pandemic landscape, paring a record $15.1 billion in unsold merchandise.
Behind the scenes, Target's actions this summer include putting pressure on its vendors, asking them to pick up the tab for transporting goods and requiring some to retain more merchandise at their own warehouses, 11 Target vendors told Reuters.
Six of the vendors said Target's recent moves drive up their expenses and squeeze their profit margins at a time when Target wants to free up cash in order to restock its stores as consumers gear up for back-to-school shopping.
Specifically, Target told some vendors it will cease transporting some merchandise they manufacture in China, instead ordering the same goods from their U.S. warehouses, adding to vendors' costs, two vendors told Reuters. Two other vendors said that Target asked them to hold some inventories in their own warehouses, forwarding the goods to Target only on an as-needed basis.
Carly McGinnis, president of Exploding Kittens, Inc, which makes card games in China sold at Target, said Target asked it to send its games directly to Target's distribution centers from its U.S. warehouses this summer. Because Target previously would pick up the games directly in China, the change adds to Exploding Kittens' transportation and storage costs, she said.
"We are having to hold back some orders" in China, she said. "We now have stock in China that Target does not need. So we are shifting that stuff to the United States and have to use our own freight," eating into margins, she said.
Target's moves could be an early harbinger of pain for some of the millions of small and mid-sized general-merchandise suppliers whose products sit on retail shelves. Inventories at general-merchandise stores rose 31.3% to reach $104.65 billion as of the end of April, the highest level since at least 2000, according to preliminary estimates from the U.S. Census Bureau.
A Target spokesperson said it "maintained open and transparent conversations with our vendor partners," but declined to comment on Exploding Kittens. Target also said in the June blog post that it would cancel orders, work with vendors to shorten lead times and ask them to help offset inflationary pressures.