U.S. Retailers’ Ballooning Inventories Set Stage For Deep Discounts

(Reuters) – Major U.S. retailers that recently scrambled to restock shelves amid product shortages disclosed this week that their stores are now packed with too much merchandise, and some are even doing what was unthinkable just a few months ago: discounting unsold goods.

It’s a sign of possible more trouble to come for retailers amid soaring inflation and higher gas prices. With shoppers’ tastes quickly shifting, many retailers now find themselves with a surplus of merchandise, driving up costs.

Costco Wholesale Corp (COST.O) said its inventories ballooned 26% in its fiscal third quarter ended May 8 that included a “few hundred million dollars” of extra holiday merchandise and being a “little heavy” on small appliances and household items. read more

At Gap Inc (GPS.N), a 34% spike in inventories was caused by poor sales at Old Navy and longer transit times for goods, CFO Katrina O’Connell said Thursday. read more

Similarly, Macy’s CEO Jeff Gennette this week cited an “imbalance” in inventory. “Supply chain constraints relaxed,” resulting in it receiving goods from overseas earlier “than we expected,” he said. Meanwhile, shoppers changed buying patterns, buying fewer home items while snapping up occasion-based clothing and other merchandise.

Average retail inventories in the United States are rising at a faster pace than sales growth, according to Citi research on 18 retailers’ first-quarter results as of May 22. At 11 of the 18, inventories rose by 10 percentage points more than sales did, according to Citi analyst Paul Lejuez. That is the widest gap since before the coronavirus pandemic began, illustrating a trend that began in March 2022.

During the supply-chain crisis, major retailers went on buying sprees, loading up on a range of merchandise and bulking up investments in merchandise so they would have enough goods in stock for shoppers flush with cash due to stimulus checks.

But the retailers’ moves backfired, according to executives and analysts. With inflation soaring and fuel prices jumping, shoppers retrenched quite rapidly, buying less clothing, TVs and high-margin appliances.

That scenario is prompting retailers like Walmart (WMT.N) and Macy’s (M.N) to clear out excess inventories by discounting more items and offering deeper promotions, a move that could erode margins. Walmart CEO Doug McMillon said on its earnings call that it had started “aggressive” price rollbacks to boost sales of some higher-margin goods, including apparel.

To be sure, retailers are still battling high costs of sourcing goods and hiring workers, which could limit the breadth and depth of promotions they offer, The Roosevelt Investment Group’s Senior Portfolio Manager Jason Benowitz said.

“You will see some discounting and it will be more than last year but ultimately it will be held back by the still high cost of sourcing inventories and labor,” said Benowitz, whose firm holds shares in Amazon.com Inc (AMZN.O), Ross Stores (ROST.O) and Autozone Inc (AZO.N).

EXCESS MERCHANDISE

As inflation lifted prices of everything from TVs to toothpaste, some lower-income consumers have curbed their spending, according to Walmart and Target.

Higher-income shoppers have shown resiliency, snapping up suits, gowns and footwear and spending more on services, economic data and results from retailers that cater to more affluent households showed. read more

Holding excess merchandise proves expensive as warehousing costs rise. Walmart store and distribution centers had 32% more merchandise, Target had 43% more goods compared to a year earlier and Best Buy (BBY.N) had 9% more merchandise in the first quarter, the retailers said. Macy’s said on its earning call inventories rose 17% from the same period in 2021.

Macy’s (M.N) Chief Financial Officer Adrian Mitchell said on Thursday consumers’ quick shift away from “pandemic categories” and receiving items sooner than expected, due to a loosening supply chain, resulted in higher inventories. He forecasted Macy’s second-quarter gross margins to reach 2019 levels.

Some anticipate that many retailers this year will start to discount more to clear out unsold merchandise. Macy’s CFO’ warned of “an elevated promotional environment,” for example.

Data from research firm StyleSage showed mid-tier department stores, such as Macy’s and Kohl’s (KSS.N), stepped up price promotions in mid-May, implementing them on 57% of items.

In the clothing category, retailers put in place discounts on 36% of items as of mid-May, up from 32% in the whole of April, according to StyleSage. The average discount, however, remained steady at 12% since January.

Kohl’s offered eight promotions in the second week of May, versus three in the year-earlier period, according to research from Jane Hali & Associates.

Similarly, Walmart was offering up to 65% off on top-rated items and up to 25% of on tech and home goods during the week of May 9. At the same time last year, deals for tech products were just 10% and offers on home products were only on select items.

By Siddharth Cavale and Siddharth Cavale | Reuters

***

The Economy and Markets

5/27  US savings rate crashes to lowest since Lehman, Fed’s inflation high – ZH
5/27  Leaders brace for economic downturn – King World News
5/27  Here’s who is buying the stock market dip – CNBC
5/27  How low will the S&P 500 go? – Seeking Alpha
5/27  Q2 2022 global outlook: bracing for volatility – Seeking Alpha
5/27  Get ready a recession is coming – Seeking Alpha
5/26  “A crucible moment”: Sequoia warns about avoiding “the death spiral” – ZH
5/26  Why the timing of the next economic slump may surprise — big time – EWTl
5/26  Labor market weakens as jobless claims hold near 4-month highs – Zero Hedge
5/26  US economy contracted more than expected in Q1, raising recession odds – ZH
5/26  El-Erian: Fed not stepping in anytime soon – Sounding Line
5/26  David Rosenberg sees bear market sinking the S&P to 3,300 – MarketWatch
5/26  CEO pay up 17% as profits, stocks soar; workers fall behind – AP
5/26  CBO boosts U.S. GDP growth estimates, says inflation has topped – CNBC
5/26  Davos: Financiers met up in the Swiss Alps, and the mood was terrible – CNBC
5/26  China holds an unprecedented massive videoconference on its economy – CNBC
5/26  Buffett’s gain of $1.9 billion on Snowflake now a loss of $37 million – WS
5/26  Recession coming? Market says it may be here. – Real Investment Advice

Real Estate Bubble

5/27  Home listings suddenly spike as sellers worry they’ll miss out – CNBC
5/27  Signs are pointing to a slowdown in the housing market—at last – Time
5/27  Number of home sellers cutting prices hits highest level since 2019 – Yahoo!
5/26  Pending home sales plunge another 3.9 percent, down for 6 months – Mish Talk
5/26  Foreclosure wave sweeping US crests in Chicago – Courthouse News
5/26  US pending home sales plunge to weakest since 2014 – Zero Hedge
5/26  Bank of Canada chief ‘intentionally’ caused housing inflation – Kitco

Precious Metals and Mining Stocks

5/27  Gold prices set for second weekly gain on dollar pullback – Reuters
5/27  A surprising benefit to owning gold– especially now – Sovereign Man
5/27  Big money will be buying gold & silver space – King World News
5/27  Gold’s fate hinges on the stock market – Daily Gold
5/26  Gold price still on pace to push above $2,000 as stagflation, recession risks rise – Kitco
5/26  Gold update video: Bulls are in control – GoldSeek
5/26  Gold falls as dollar inches higher; Fed minutes no surprise – Reuters
5/26  Zimbabwe used gold, platinum to secure credit – Bloomberg
5/26  Gold slides below the $1850 mark in quiet trading – USAgold
5/26  Gold bulls are capitulating – King World News

Monetary Madness, Cryptos & Currency Wars

5/27  Yuan, dollar divergence heralds more losses ahead – Zero Hedge
5/27  NY Fed sees 3-yr balance sheet rundown to $5.9T – Newsmax
5/27  Retail investors reach for gold to counter crypto risk – World Gold Council
5/27  Cryptocurrency firms hope bear market will remove bad players – CNBC
5/27  How influencers hype crypto, without disclosing their financial ties – DNYUZ
5/26  JPMorgan says Bitcoin is 25% ‘undervalued’, Terra FUD overdone – ZH
5/26  Ruble slides from 4-year-high on Russian rate-cut – Zero Hedge

Sanctions, Shortages & Supply Shocks

5/27  Russia ready to help solve global food crisis, on one condition – Zero Hedge
5/27  WTO says food crisis could last two more years without Ukraine – Guardian
5/26  “Too slow”: FDA admits delayed response to US baby formula plant – ZH
5/26  Rash of parts thefts is leaving Freightliner trucks inoperable – Freightwaves
5/26  EU proposes to make breaking Russia sanctions a crime – Antiwar.com
5/26  One-billion people are at risk of rolling blackouts this summer – Oil Price
5/26  US allows 2-million baby formula cans in from UK, lets Abbott release 300,000 – ZH
5/26  World has just 10 weeks’ worth of wheat left after Ukraine war – Telegraph
5/26  White house advisors had secret meeting with Saudi Arabia to discuss energy – Oil Price
5/26  Iranian-Russian ‘oil smuggling’ network hit with U.S. sanctions – Oil Price
5/26  Russia’s oil production has plunged even as its revenue climbs – Oil Price
5/26  UK hits oil & gas companies with 25% windfall tax – Oil Price
5/26  Russia slams sanctions, seeks to shift blame for food crisis – AP

FED-up & Underfed: Inflation from Too Much Money & Too Few Goods

5/27  Rising rates are squeezing landlord profits – Zero Hedge
5/27  Jerome Powell’s Volcker deficit – Project Syndicate
5/27  Fed’s inflation measure rose 4.9% in April. Is inflation slowing? – CNBC
5/27  New Czech CB chief wants more stocks, gold to make bank profitable – NASDAQ
5/26  Peter Schiff: It’s not Putin or the pandemic. It’s the Fed! – YouTube
5/26  Mid-East oil producers to cut prices as extreme backwardation eases – OP
5/26  Overdue reality check for Fed and markets has barely begun – Financial Times
5/26  Leaders brace for economic downturn – King World News
5/26  Fed minutes: Monetary policy may move into restrictive territory – CNBC

War and Civil Unrest

5/27  Israel informs US it killed Iranian IRGC colonel. Officials infuriated – ZH
5/27  Putin’s ally says ‘Ukraine Closed … Poland next’ in chilling video – WION
5/27  Russia deploys 50-Year-old T-62 tanks To Ukraine – The Drive
5/27  Fears of Chinese invasion drives Taiwanese civilians to target practice – AOL
5/27  Russia accused of kidnapping own citizens to fight war in Ukraine – Yahoo!
5/27  Russia appears to blitz Ukraine positions with thermobaric warheads – MSN
5/27  History haunts the global elites at Davos – MSN
5/27  Scholz condemns invasion of Ukraine and urges global cooperation – Guardian
5/26  Putin authorizes Russian citizenship for occupied Ukrainian territories – ZH
5/26  Ukraine to get more armored personnel carriers from Lithuania – Defense Blog
5/26  Russian troops plunge through Ukraine lines in Donbas – Military Times
5/26  Poland requests six additional patriot batteries from US – Defense News
5/26  Russia to open sea corridors from Ukraine ports amid wheat crisis – ZH
5/26  Japan, emboldened by Biden and wary over Ukraine, gets tough on China – MSN
5/26  Ukraine latest: US envoy warns of Russian attack ‘springboard’ – Yahoo!

Cyberwar, Cyberterrorism and Cybercrime

5/27  A face search engine anyone can use is alarmingly accurate – DNYUZ
5/25  Winning the tech battle with China – Washington Examiner
5/25  Cyber warfare in Ukraine – Federal News Network

Politics, Authoritarianism and Censorship

5/27  Former Attorney General Bill Barr says Clinton guilty of ‘sedition’ – CB
5/27  Biden says “the Second Amendment is not absolute” – Summit News
5/27  Western powers sound alarm on China plan for South Pacific – Yahoo!
5/27  Trump personally blasts Kellyanne Conway – Daily Beast
5/27  Trump loses appeal, must testify in New York civil probe – AP
5/27  Davos elite reassess globalization amid turmoil of pandemic and war – MSN
5/27  The Republican wave is building fast – CNN
5/27  Poll suggests Dems are misreading Kamala Harris 2024 candidacy – SFGate
5/27  Documents shed light on secret U.S. plans for apocalyptic scenarios – MSN
5/26  Twitter investors sue Elon Musk, alleging stock manipulation – Zero Hedge
5/26  Blinken: China “undermining” global order while enriching itself – ZH
5/26  Report shows FBI spied on 3.3 million Americans without warrant – Epoch Times
5/26  UAE Minister: Serious crime in metaverse should be outlawed by U.N. – CNBC
5/26  Davos reveals building blocks for “green” social credit system – OffGuardian

Covid Craziness and Now a Pox Upon Us

5/27  Pfizer CEO: There will be “constant waves” of Covid – SHTF Plan
5/27  China paralyzed in feud between Xi and Li over Covid response – Zero Hedge
5/27  Lockdowns had ‘little to no effect’, saved just 10k lives in Europe, US – DM
5/27  COVID vaccines may impair long-term immunity to the virus – Arutz Sheva
5/27  People are leaving Hong Kong. Here’s where they’re going – CNBC
5/26  Virologists warn that monkeypox has become a “hyper-mutated virus” – EAD
5/26  The NHS just edited their monkeypox page … to make it scarier – OffGuardian
5/26  Virologists warn monkeypox has become a “hyper-mutated virus” – Snyder
5/26  Research funded by Fauci, Gates could see bird flu as next pandemic – Natural News
5/26  Monkeypoxmania – Consent Factory
5/26  Viruses on hiatus during Covid are back and behaving unusually – Stat News
5/26  Bill Gates lays out plan for global takeover – Mercola

Self-Reliance, Health and Prepping for Survival

5/27  Preparedness logistics: the list of equipment and supplies. – Survival Blog
5/26  COVID lessons & lockdown life in a vacuum – More Than Just Surviving
5/26  An herb patio garden. One small sage plant is plenty – part 1 – Survival Blog
5/26  Patio herbs, spices, peppers, and tomatoes – part 2 – Survival Blog
5/26  How I will choose an area before moving to the American redoubt – SB

The Art of Collapse

5/25  Top-10 benefits of putting all your money into gold – Babylon Bee
5/24  Goodbye, my love, goodbye – Caitlin Johnstone
5/22  JP Sears: Woke consultants helping your business go broke! – YouTube
5/21  Along for the pride with LGBTQs by Bill Maher – YouTube
5/20  This should make you very angry – Russel Brand
5/19  Surviving apocalypse proportional to how much you buy from conservatives – BB

Steve Cortes: The Second Amendment, Inflation, Energy

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