Retailers, including Target, have been forced to cut prices on general merchandise, such as clothing, electronics and home goods, because of excess inventory of goods. Consumers had to shift more of their spending to higher priced food and gasoline. But Target reported that its price cuts did little good: It ended the quarter with 1.5% more inventory than it had three months earlier and 36% more than it had a year ago.

The company said it reduced the amount of discretionary items it held in warehouses, but Target noted the sales on those items “put significant pressure on our near-term profitability.”

Target’s net income fell to $183 million last quarter, down from $1.8 billion during the same period a year ago. The company’s revenue of $26 billion was up 3.5% from a year ago and roughly in line with forecasts.

After seven quarters of strong profit growth, this marks the second-straight quarter of plunging earnings at Target, although this decline was far more than the 40% drop in the previous quarter.
Target’s disappointing results came in contrast to much stronger results at larger rival Walmart (WMT), which Tuesday reported profit was down only slightly from a year earlier. But Walmart also said it expects a 8% to 10% drop in annual earnings, although that was not as big a drop as it previous forecast.
Shares of Target (TGT) fell 3% in premarket trading on the news.