Reeling under the weight of excess inventory, some big-box retailers are offering discounts and sales events this summer.
With prices rising across the country, from gasoline to toilet paper, certain “non-essential” big-box items have been burning holes in retailers’ shelves, likely confounding consumer expectations of inflationary pricing.
First-quarter earnings reports in May sent big-box retailers like Target and Wal-Mart into a tailspin, stock-market-wise, The Dallas Express reported. Target saw a 48.2% decrease in year-over-year profit measures, while Wal-Mart clocked its own 25% decline.
These dismal figures led to large sell-offs, driving Target stock down by 25% and Wal-Mart’s by 11.4%.
The same reports found that consumers were spending more on groceries and clothing and less on electronics, patio furniture, and other higher-priced consumer items.
This post-COVID retail landscape proved hazardous for many retailers in the United States given the reality of global supply-chain disruptions, some due to Chinese COVID-19 lockdowns and others owing to skyrocketing external costs (mostly energy-related) caused by Russia’s expansionist invasion of Ukraine.
In this landscape, big-box retailers sought to hedge their bets and stock up on nonperishables in 2021, like TVs, exercise equipment, kitchen appliances, and other big-ticket items, hoping to weather the supply-chain storm, according to Bloomberg.
However, retail stores found themselves sitting on excess inventory come the second quarter of 2022, a well-read metric helping to drive investor pessimism.
Big-box retail outlets like Target and Wal-Mart, suffering from overstocked warehouses, are looking to correct this summer by lowering prices to clear inventory.
“We thought it was prudent for us to be decisive, act quickly, get out in front of this, address and optimize our inventory in the second quarter — take those actions necessary to remove the excess inventory and set ourselves up to continue to be guest relevant with our assortment,” said Target CEO Brian Cornell in an interview with CNBC.
As noted in The Dallas Express, home goods are a category of inventory Target seems intent on offloading at a discount in order to recalibrate its operations to the new retail reality.
