Bloated inventories hit Walmart, Target and other retailers’ profits, trucking demand

Mark Solomon, Bloated inventories hit Walmart, Target, and other retailers’ profits, trucking demand, FreightWaves, May 20, 2022. 

However, furniture, home furnishings and appliances, building materials and garden equipment, and a category known as “other general merchandise,” which includes Walmart and Target, among others, reported higher inventory-to-sales ratios, according to government data analyzed by Michigan State.

Macroeconomics and supply chain

Part of the bottom-line blowup was due to fuel, which soared to record highs following Russia’s Feb. 24 invasion of Ukraine. Part of it was due to margin pressures caused by an unfavorable sales mix as consumers shifted their buying from higher-margin goods like electronics to less profitable items like groceries. An extension of that was an overshoot of inventory-stocking activity, which came back to bite the retailers after waning concerns over the COVID-19 pandemic pushed more consumer buying toward services and “experiences” and away from goods.

There’s little that retailers can do about fuel prices. It can be argued they should have expected the pandemic-driven buying spree from March 2020 until the end of 2021 to peter out and that they should have planned their inventory strategies accordingly. Yet demand forecasting has always been a tough nut to crack, and the market is where it is. Inventory build may also have been the result of supply chain delays at the start of the year that resulted in some late deliveries of impaired freight.