Target’s Warning Puts Retailer Credit Concerns Back in Focus

Target Corp.’s second reduction of its earnings forecast in three weeks is adding to concerns over bonds issued by retailers, which was already one of the worst-performing sectors this year.

The spread on Target’s 2.95% bonds due 2052 widened 8 basis points to 111 basis points Tuesday after the retail giant said it will need to mark down more goods and cancel orders to ease an inventory surge. The cost to protect the company’s debt against default climbed to the highest level since September 2017.

Bloated inventories are becoming an industrywide problem, hitting everyone from Target to Macy’s ...