Big retail chains in the United States face mountains of excess inventory as long-delayed orders of goods that were popular during the earlier days of the COVID pandemic pour-in, only to be met by American consumers whose shopping habits and preferences have now changed.
Outdoor furniture and leisurewear have now given way to restaurant meals and airline tickets as people catch up on experiences they put on hold during the pandemic, according to NBC News. To clear store shelves of unwanted stock, Walmart, Macy's, Target, and other retailers have been slashing prices on thousands of products in their stores and offloading merchandise in bulk before it even leaves the warehouse, often at substantial losses for them.
Those losses could mean big gains for off-price retailers such as TJ Maxx, Marshalls and Ross, as more consumers in the U.S., particularly parents, squeezed by the rising prices for food, gas, and just about everything else, rein in their spending during these tough economic times and turn to discounters for bargains.
Retailers could not have planned this drastic sort of cliff
Brett Rose, the CEO of United National Consumer Suppliers, a wholesale distributor that buys overstock and discounted products from manufacturers and resells them to retailers, said that he does not think any retailer could have planned for this drastic sort of cliff and how it was going to happen.
He added they have all these products that came in that nobody is buying. Target, Walmart, Macy's, and other big retailers said inventory levels during the first quarter of 2022 were up anywhere from 17 percent to 45 percent compared to the same period last year.
John Furner, the CEO and president of Walmart U.S., told analysts this month that there is probably 20 percent of inventory that they wish would just disappear if they could. To address that problem, Walmart rolled back prices on more than 10,000 products, including sports equipment, home décor, and kitchen appliances. Best Buy and Target also marked down more items to move products out of their distribution centers and stores.
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Full-price retailers such as Walmart rolling back prices
According to Lorraine Hutchinson, a retail analyst with Bank of America, full-price retailers need to unload poor-selling merchandise quickly with limited shelf and storage space and shipments of new goods arriving every other week.
She added that they don't want the clearance to cannibalize the full-price sales of those fresh products, and they would instead take the hit, move it through a channel where it can't be compared to their full-price items and do the best they can with the new fresh product that is arriving.
That is great news for Burlington Factory CEO Michael O'Sullivan, who told analysts last month that the chain has been taking advantage of cheap closeout deals to pad its inventories for late summer and fall when he expects a surge in discount shoppers in the U.S.
