Tuesday local timeRetail giant Target Corp (Target), along with other major retailers, has warned that the company's profits will be severely affected if it does not take active action to reduce excess inventory.

Target slashed its profit margin forecast for the second quarter as it plans to implement additional price cuts to its products, clear excess inventory and cancel some orders.

Almost all retailers from Walmart Inc to Gap are faced with the problem of excess inventory. Most of their consumers, plagued by inflation, no longer choose to buy goods that were popular during COVID-19 's epidemic. Gap, for example, says consumers need party clothes and office work clothes more than woolen sweaters and sportswear. Walmart Inc also said that the discretionary purchasing power of some families has been weakened due to rising gasoline and food prices. Both Abercrombie & Fitch and American Eagle Outfitters reported significant increases in their inventories, up 46 per cent and 45 per cent respectively from a year earlier, as goods began to slow sales a year ago and supply chain bottlenecks were still delaying.

Jeff Snider, a strategist at Alhambra Investment, has been tracking the increase in retail inventory. He found that inventories excluding cars and parts (below inflation-adjusted) had surged 11.5 per cent since October last year, surpassing the 7.1 per cent increase in inventories in the 20 months from 2003 to 2005 (due to the US housing bubble crisis and refinancing liquidity peaking).Jeff Snider said it was the fastest growing and largest inventory glut in at least 30 years.

The decline in sales is due to higher interest rates and a spending spree that consumers borrowed in the previous two years. Now they are hoarding a lot of goods and have little money on hand, so consumer demand can be expected to continue to be suppressed.

According to the data, US car sales are down 25 per cent year-on-year and home sales are down 27 per cent. Such a decline has only occurred in the context of a recession.

At the same time, many people have put their existing properties up for sale because of rising operating costs, interest rates and weak consumer demand. At the same time, the supply of new multi-family and single-family homes has set a new record, helping to further push down house prices.

In the past nine months, personal real disposable income has been flat or even decreased compared with previous years.The University of Michigan's consumer confidence index hit an 11-year low in May, and consumer spending plans are close to past recessions.

As sales decline and inventories increase and productivity declines, layoffs naturally begin to increase. If it goes on like this, more and more American citizens will struggle to repay their loans.

Seeking Alpha analysts point out thatCorporate inventory clearance is the next stage of the cycle, which helps to reduce people's cost of living and create trading opportunities for those with plenty of money.For those who are heavily in debt and have little cash, it can be difficult.

Analysts believe stocks, cryptocurrencies, most commodities, corporate bonds and government bonds will be sold off at the same time in the first six months of this downward cycle. The shift from supply scarcity and inflation to supply surpluses and deflation will lead to a sharp drop in corporate profits and an increase in demand for capital security.Cash and quality bonds will be the next hot assets.