Wesfarmers has confirmed it is investigating accusations that supplier rebates may have artificially inflated Target's earnings.
Allegations emerged late last week that Wesfarmers-owned Target had struck deals with some overseas' suppliers to have additional rebates on stock with a guarantee that it would pay more later.
This means Target's earnings could take a hit in the second half due to higher inventory costs.
"Wesfarmers is doing an investigation into a supplier rebates issue that has emerged at Target," a spokesperson from the retail giant told AAP.
But, the spokesperson declined to comment further on the investigation or the future of former Target boss Stuart Machin.
Often dubbed as Wesfarmers' troubled child, Target has struggled with declining sales and sluggish growth.
In December, Wesfarmers announced Mr Machin was shifting from his position as Target managing director to a yet-to-be-identified senior role in July.
Kmart managing director Guy Russo was promoted to head Kmart and Target as part of an organisational restructure that may result in some Target stores being converted into Kmart outlets.
Target's FY16 first-half earnings before interest and tax was up 5.7 per cent to $74 million.
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