Liz Young of The Wall Street Journal reports that a sharp pullback in stockpiles comes as merchants are trying to focus on getting a better handle on volatile consumer demand. She writes:
Retailers are heading into their most crucial sales period of the year with a very different inventory strategy than they undertook in 2022.
Warehouses are no longer stuffed with merchandise and store shelves aren’t spilling over with discounted goods in hopes of luring wary consumers into last-minute sales. Instead, merchants from big-box retailers like Walmart and Target to more specialized sellers like Best Buy and Dick’s Sporting Goods have pared back their inventories while trying to focus their supply chains more tightly on products that shoppers want.
Forecasting shopper demand has been one of the biggest challenges for retailers mapping out their supply chains during the pandemic, as volatile shifts in buying patterns had consumers switching their spending rapidly from items such as home decor to office apparel and then towards travel.
Many retailers have spent much of the year working through the stockpiles from last year and now say they have cleaned up their distribution centers and their balance sheets.
Minneapolis-based Target cut its inventory 14% for the quarter ended Oct. 28 compared with the same quarter last year, as its comparable-store sales fell 4.9%. The retailer, one of several that chartered ships in 2021 to get around port bottlenecks, ended up overstocked last year with goods such as comfortable clothes and small appliances that were popular during the pandemic but fell out of fashion as consumers returned to offices and restaurants. […]
The overall ratio of inventories to sales for retailers, excluding motor vehicle and parts dealers, is tight by historical standards. The measure, which tracks how much companies have in stock compared with what they sell, fell to 1.18 in September from 1.21 a year earlier, according to the Census Bureau.
At department store chain Macy’s, tighter inventories helped fuel improved gross margin even though sales declined last quarter. Macy’s inventory was down 6% in the third quarter compared with a year earlier and down 17% compared with 2019. Tony Spring, president and CEO-elect, said the retailer is focusing on “variety versus redundancy.”
“The customer today does not want an endless aisle. They want the best aisle,” Spring said on an earnings call Nov. 16.
Read more here.