Retailers are saddled with an excess of unsold goods. They’re not alone. Banks also misjudged customers’ behavior. For retailers, the consequences of getting it wrong are especially painful, writes jennifersaba:
to cover bad debts when Covid-19 hit, only to find that consumers have remained curiously creditworthy. JPMorgan stowed away $20.8 billion of so-called loan loss provisions, yet has unwound $11.1 billion of them. As boss Jamie Dimon said in April: “everybody forecasted, and everyone’s wrong all the time.”
The big difference is that when banks pile up more provisions than they need to cover future problems, they can always change course later and use the money elsewhere. That’s not true for retailers facing piles of unwanted TVs and toasters. Worse, Target said in May that its inventory was up by 43% year-on-year, yet it took three weeks to spell out the effect on its profit margin
. Its shares are down a third this year so far. Those who don’t know their customers will struggle to please their investors.Target on June 7 said it is taking additional actions to control its costs, having found itself with too many unsold goods. The U.S. retailer’s plan includes cutting prices and cancelling orders.
Target now expects its second-quarter operating profit margin to be in the range of 2%, down from the 5.3% it forecast on May 18.Editing by John Foley, Sharon Lam and Amanda Gomez
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