The Inventory Glut of 2022

Target stallsAfter a couple years dealing with merchandise shortfalls and supply chain issues, retailers across many categories are encountering a huge glut of slow-moving inventory.

Target is the latest big retailer to report massive year-over-year gains in unsold inventory, up 43% over 2021. This is hitting big box and local merchants alike, as well as durables and apparel retailers. Many furnishings retailers have been dealing with this problem for months.

Retailers from Walmart to Gap face a glut of inventory as inflation-pinched shoppers skip over categories that were popular during the first two years of the pandemic. Gap, for instance, said customers want party dresses and office clothes instead of the many fleece hoodies and active clothes the company has. Walmart said some families are making fewer discretionary purchases as the prices of gas and groceries rise. Abercrombie & Fitch and American Eagle Outfitters both reported a steep jump in inventory levels, up 45% and 46%, respectively, from a year ago from a mix of items not selling and supply chain delays easing. The extreme shift in consumers’ spending habits comes as retailers start to get back to healthy in-stock levels. That means some have an abundance of sweatpants, throw pillows and pajamas just as consumers search for swimsuits and suitcases. Plus, some shoppers are trimming back on spending due to inflation or putting more of their dollars toward experiences like dining out and traveling.

Read the full article on CNBC:
Target warns of squeezed profits from aggressive inventory plan

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