As consumers are transitioning tastes from early pandemic comfort wear to more formal attire, some retailers are taking steps to mitigate losses and dispose of excess inventory.

On Tuesday big-box retailer Target reported that its profits will suffer in the immediate future, as it lowers prices on shunned items, cancels orders, and makes an effort to shed extra inventory.

The moves come after Target cut its profit margin projections for the fiscal second quarter to allow for several items to be deeply discounted or placed on clearance to help offload them. Shares of the stock fell 4% midday Tuesday.

A dramatic change in consumers’ spending habits has resulted as supply chain issues are mitigated somewhat. The abundance of sweatpants and pajamas that were once coveted by consumers has morphed into a quest for formal office attire, swimsuits, and suitcases, as more people head back to the office and the summer vacation season arrives. Meanwhile, rampant inflation is also prompting shoppers to curb spending on clothing to save for vacations and dining experiences.

“We thought it was prudent for us to be decisive, act quickly, get out in front of this, address and optimize our inventory in the second quarter — take those actions necessary to remove the excess inventory and set ourselves up to continue to be guest relevant with our assortment,” CEO Brian Cornell said in an interview with CNBC.

Cornell said the company’s stores and website are seeing robust traffic and “a very resilient customer,” but that pandemic-era items are less popular than they once were.

“We want to make sure that we continue to lean into those categories that are relevant today,” Cornell said.

For the latter half of 2022, Target predicts profit margins could reach roughly 6%, which is an improvement on its typical performance for the fall season in pre-pandemic years. Target also said it still anticipates it will gain market share in 2022 and maintain single-digit growth for the year.

While some retail ETFs are off today amid the news, for investors looking to use ETFs to take advantage of any consumer restructuring by retail stores, the VanEck Retail ETF (RTH)Invesco S&P 500 Equal Weight Consumer Discretionary ETF (RCD), and ETFMG Prime Mobile Payments ETF (IPAY) are a few options to consider.

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