Date: Monday, September 20, 2021
Source: The Wall Street Journal
Retailers are loading up on goods for the holiday season in a strong show of confidence in consumer demand even as the Delta variant and supply-chain disruptions add uncertainty to restocking efforts.
Best Buy Co. , Target Corp. and other large merchants are amassing more inventory compared with last year’s pandemic-depressed levels, in some cases logging double-digit percentage increases as the stockpiles also exceed 2019 values.
Covid-related factory shutdowns in Asia and global shipping bottlenecks have businesses jockeying for merchandise and vessel space to avoid losing critical fourth-quarter sales, a contest that tends to favor deep-pocketed big-box retailers over smaller competitors.
Global inventories at Walmart Inc., for example, rebounded this summer after dropping in the same period of 2020 compared with pre-pandemic levels, as the company stepped up efforts to meet strong consumer demand, including chartering vessels to bypass ocean shipping bottlenecks.
“In 2020, at the end of the second quarter, we were way too light in stores and on the e-commerce side,” Walmart Chief Executive Doug McMillon said at a Sept. 9 investor conference. “So we would take even more inventory if we could get it.”
Walmart’s consolidated inventories reached nearly $47.8 billion in the quarter ended July 31, a 16% increase from the year-ago period and up 8% from the same quarter in 2019. Walmart U.S. inventories were down 4.6% between the fiscal second quarter of 2021 and that of 2020, a spokesman said.
The companies are stocking up despite swings in demand that have come as coronavirus cases have surged in parts of the U.S. driven by the Delta variant. U.S. retail sales rebounded in August as consumers spent more at stores and online following a sales decline in July.
The effort to push more goods to stores and warehouses follows a drop in inventories over the past year after retailers pulled back orders in 2020 in the early months of the pandemic and then faced big supply-chain backups as they sought to restock this year.
The ratio of U.S. retailers’ inventories to sales fell this spring to the lowest level in U.S. Census Bureau records dating to 1992, and the measure has ticked up only slightly even as record volumes of container imports have flowed into the U.S.
Jason Miller, an associate professor of logistics at Michigan State University’s Broad College of Business, said the declining inventory measure has been driven by strong sales in consumer goods and shortfalls in specific categories, mostly automobiles, car parts and apparel. Production in those segments, he said, has fallen far short of demand.
Adjusted for inflation, stock of those items has declined substantially from 2019, while supplies of general merchandise and home-improvement stores rose over the same period, according to Bureau of Economic Analysis data.
While some specialty apparel sellers have kept stockpiles lean and boosted profit margins by avoiding discounts, bigger mass-market retailers are using their clout with carriers and suppliers to acquire as much product as possible.
Target’s inventory rose to almost $11.3 billion in value in the most recent quarter, up more than 26% from the same period in 2020, putting the retailer in a better position and providing it more confidence going into the holidays than last year, the company said.
Even so, shoppers still sometimes encounter empty shelves, either because sales are outpacing the retailer’s expectations or because “the vendors themselves are facing constraints in their ability to deliver product,” Target Chief Operating Officer John Mulligan said during the company’s second-quarter earnings call last month.
[Read from the original source.]