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Some retailers have grown to prefer large inventories

While many retailers are scrambling to get rid of the excess merchandise that floods their stores and warehouses, including discounts and order cancellations, some are open to higher inventory levels.

Merchants including

dick sports equipment Ltd,

Lowes

When

walmart Ltd.

The rise in inventories marks a recovery from last year’s inventory shortages caused by supply chain disruptions, and it says it is well positioned to capitalize on consumer demand this holiday shopping period.

Dick’s CEO Lauren Hobart said in the November 22 earnings call:

Supply chain expert says some retailers’ views are changing Towards an ever-growing stockpile Apparel, electronics and sporting goods sellers are looking to capitalize on resilient demand in some sectors.

Vishal Gaur, professor of operations management at Cornell University’s SC Johnson College of Business, said companies building inventory are trying to make sure they have goods on hand at the right time.

“In retail, customers often face stock-outs,” Gaur said. “If a customer is confident that a product is available in their size, such as at a retail store, they are more likely to visit that store and purchase the product.”

This tactic seems to have paid off during the Black Friday shopping holiday.real estate service company

CBRE Group Ltd.

A survey of 13 malls and outdoor shopping centers managed by the company across the United States found no shortages of merchandise during Black Friday this year.

discount retailers

Burlington store Ltd.

When

TJXMore

Co., like any merchant, is happy to stock up. Consider unloading goods.

Burlington store inventory increased 8% on a like-for-like basis at the end of the third quarter. Same time last year. CEO Michael O’Sullivan said he expects that to increase over the holidays.

“Last year, store inventories were far too low for spring,” O’Sullivan said on a Nov. 22 conference call with analysts.

A large amount of goods fills the warehouse.


Photo:

Rick Bowmer/Associated Press

TJX, which operates brands such as TJ Maxx, HomeGoods and Marshalls, said its inventory was up 26% in the third quarter compared to last year.But retailers said a big leap left inventory turns and markdowns We are in line with pre-pandemic levels and plan to continue increasing our inventory.

“We still have plenty of liquidity and are in a great position to take advantage of the great buying environment,” Scott Goldenberg, the company’s chief financial officer, said on the Nov. 16 earnings call.

Lowe’s, which sells home improvement supplies, plans to increase its inventory this quarter by ordering items earlier than usual in preparation for post-holiday events, said Brandon Sink, the company’s chief financial officer. said.

The ratio of inventory to sales for the entire retail sector, a measure of how much inventory a company has compared to what it sells, remains grim by historical standards. According to the latest Census Bureau data, the ratio was 1.25 for him in September 2022, compared to 1.47 in September 2019.

A lower ratio indicates greater efficiency in matching inventory to sales. If measures are too low, stores risk running out of stock and losing sales, experts say. It’s an early issue in the pandemic when goods like toilet paper and sanitizing wipes were in short supply as consumer demand surged.

Inventory level relative to mass retailer sales has grown well beyond pre-pandemic levels Because there are plans to replenish inventory in stores and warehouses, out of sync consumer purchasing patterns and left a stockpile of unsold goodsThe ratio of inventory to sales for these stores was 1.54 in September 2019 from 1.39 in September 2019, according to Census Bureau statistics.

After late shipments, factory closures and other bottlenecks last year, merchants were wary of stockouts, said Jason Miller, an associate professor of logistics at Michigan State University’s Eli Broad College of Business. He said he was. Long lead time for orders.

“If they can say, ‘With the inventory we have now, we’re going to be able to provide our customers with the level of service we want to provide,’ yes, that’s more than we needed pre-Covid. Maybe, but lead times are longer,” says Miller.

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Footwear and apparel manufacturers

Nike Ltd.

said it targeted discounts on specific products.the company reported Inventories up 44% Most recent quarter compared to the same period last year. However, Chief Financial Officer Matthew Friend said that only about 10% of the stock, focused on out-of-season products such as apparel, was a surplus product that Nike was trying to quickly respond to. I said yes.

Walmart’s U.S. Operations Reported inventory rise About 12.4% in the third quarter. Most of that was in stores, not in the supply chain, said Walmart US president and CEO John Farner, whose backups plagued retailers in 2021 and earlier this year.

“We had a pretty weak year last year, so inventories have improved a lot,” Mr. Farner said on the Nov. 15 earnings call.

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https://www.wsj.com/articles/some-retailers-are-learning-to-love-bulked-up-inventories-11669841467?mod=pls_whats_news_us_business_f Some retailers have grown to prefer large inventories

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