Why Target will probably have the best Black Friday discounts this year

• Target will probably have the best deals this holiday shopping season, UBS analysts say.
• That's because Target has a glut of inventory it needs to get rid of during the holidays.

If you're looking for the best deals this holiday shopping season, Target is probably your best bet.

That's according to UBS analysts Michael Lasser, Atul Maheswari, and Mark Carden, who wrote in a note published this month that the Minneapolis-based big-box store will likely offer significant discounts throughout the holiday season as it tries to offload excess merchandise.

"Since Target has been amongst the most impacted by having a glut of inventory this year, it will probably set the tone across several categories," the analysts wrote. "Our work shows that Target is currently being particularly aggressive in discounting items in certain areas like home, consumer electronics, and toys."

The analysts visited Target stores and tracked how many items were on sale. When it came to televisions, for example, 26 of a store's 50 TVs were discounted and advertised as Black Friday deals. Overall, 33% of items in those categories were on sale, the analysts said.

They did note that Target's discounting has been less aggressive in categories like apparel and beauty.

UBS' findings line up with what Target executives highlighted during the company's third-quarter earnings call on Wednesday. Target plans to offer up to 50% off across toys, games, electronics, and kitchen appliances during the week of Black Friday, Christina Hennington, Target's chief growth officer, said during the call.

Target isn't the only retailer expected to offer heavy discounting this year. Price cuts could hit record highs of 32% this year, according to data from Adobe Analytics.

The deals are partly the result, as UBS noted, of too much inventory. Though the supply chain turmoil that began after the onset of the pandemic resulted in shortages last season, this year is a different story. Target CFO Michael Fiddelke said during the call that there was a "rapid acceleration in the global supply chain" in the third quarter, which caused Target to receive shipments earlier than scheduled.

Retailers don't like sitting on too much merchandise — they don't make money off it until it's sold, so until then, it's just sitting in stores or in warehouses. And while that's a problem for the retail world, it's a good thing for consumers. Morgan Stanley analysts said in October that these companies will slash prices to try to get rid of all that excess stuff.

"We believe many will turn to aggressive discounting to solve their inventory problem which is likely to spark a 'race to the bottom' as companies attempt to cut prices faster than peers and move out as much inventory as possible," the analysts said.