Target Expands Inventories to Repair Stock-Outs
The retailer built up stocks ahead of sales in the third quarter to ensure more goods were on store shelves
Target improved its in-stock levels by as much as 50% for many items in the third quarter, Chief Operating Officer John Mulligan said, addressing a key concern the store chain has said was dragging down sales growth.
The result was a 4% increase in inventory in the quarter ending Sept. 30 that was greater than Target’s sales growth of 1.9% compared with the same quarter a year ago. Mr. Mulligan said the company has increased stocks of “fast turning” items in stores to reduce the regularity with which those items need to be replenished.
“In a very short-time, the results of our efforts have been encouraging,” Mr. Mulligan said.
Target is one of many major retailers that saw excess merchandise pile up in the third quarter, as sales slowed down across the board. Although some stockpiling is normal ahead of Black Friday and the holiday shopping season, this year’s retail inventories reached particularly high levels at many companies. The ratio of inventories to sales has grown in recent months to the highest levels in five years.
Many retailers continue to struggle to manage increasingly complex supply chains as customers choose to shop online more often and have goods delivered to their homes.
Target’s e-commerce sales increased nearly 20% in the most recent quarter, but that was down from 30% growth in that segment in the second quarter.
Like other big-box retailers, Target has sought to develop an efficient way to fulfill online orders while continuing to keep store shelves stocked. The retailer has also been adding smaller, urban stores that require different supply chain planning. This year, Target spent around $1 billion on updating its supply chain and technology infrastructure.
“We feel very good about our inventory position going into the holiday season in relation to both our sales planned and our work to improve in-stock reliability,” Ms. Smith said