Below is a chart and brief excerpt from today's Early Look written by Retail analyst Brian McGough.
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One of the most troubling trends we’ve seen quarter-to-date is the simply massive spike in inventories in US retail. We’re seeing the combination of companies over-ordering product because margins are so high (the corn farmer metaphor) as well as double ordering because supply chain challenges left money on the table over the last six months. We’re talking US inventories up 27% vs 2019 at Wal Mart and up 55% vs 2019 at Target, -- or about 2,000bps ahead of sales growth. Narrowing in on some large apparel sellers we see even bigger variances (vs ’19) with GPS inventories up 40% with sales up 2%, URBN with inventories up 39% with sales up 14%, and JWN inventories up 19% with sales down 5%. And companies are saying that merchandise margins are sustainable with inventory bloating into a decelerating consumer spending environment. |
