Inventory Piling Up as US Retail Sales Slow
Second-quarter earnings season for a majority of US apparel retailers is shaping up to be an unmitigated disaster.
Thanks to shoppers spending cautiously on clothes in recent months — despite a rallying stock market and low 3.7% unemployment rate — retailers of all kinds are sitting on mountains of excess inventory.
Now that inventory must be worked off at profit-margin-busting prices in order to make way for the lucrative, full-price garb targeted to back to school shoppers in August and September.
The department store space has been particularly hard hit experiencing a tough holiday period, characterised by traffic declines and execution errors. This has led to elevated inventories and elevated promotional activity, exacerbated by an optimistic spring ordering season.
Bloated inventory levels in the lead-up to back to school is the last thing retailers need. The sector continues to be hammered by Amazon, investments to speed up online shipping, bankruptcies and the need to jack up prices due to the U.S.-China trade war hampering supply chains.
Unfortunately, this is the reality as the red-hot Trump stock market has people spending on vacations and new cars instead of a fresh pack of underwear or pair of jeans.