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The shock from the Target and Walmart earnings that caused the single largest drop since the 80s for both companies was not just the pain of inflation that is a

by tempsy 4y ago

The shock from the Target and Walmart earnings that caused the single largest drop since the 80s for both companies was not just the pain of inflation that is adding to their costs but also from rising inventories because consumers seem to be already sacrificing discretionary purchases. Will be interesting to see if discretionary spend continues to meaningfully drop and whether we will actually start seeing price cuts/discounts eg deflation as retailers look to reduce inventory.

55555 4y ago
I can't speak for Walmart and Target, but the COVID supply chain disruptions caused my business and likely many others to over-invest in inventory because it takes longer to restock, and the inventory will sell at slimmer margins because I paid 2X+ the normal shipping rate to get it to the destination country. Many businesses are sitting on large amounts of inventory that can barely be sold at a profit. Now discretionary income is dropping, meaning demand and price points will fall. We have too much landed inventory we paid too much for and less people spending less to buy it. It's not pretty.
- electrondood 4y ago
  Exactly. Inventory is high because companies looked at the supply chain shutdown and thought "I'll load on up extra inventory, to hedge in case this happens again." Those prices are going to come down to entice the consumers scared off by inflation.
mdorazio 4y ago
From reading their investor statements it was more complicated than that. They overpurchased inventory of goods that saw lowering demand as people started going back to the office or spending money elsewhere as pandemic restrictions lifted. Ex. People shifted discretionary expenditures from TVs to vacations. Given how tight the labor market is I don’t think we’ve really seen the impact of overall lower discretionary spending yet - that probably won’t play out until this coming holiday season.

by tempsy 4y ago

55555 4y ago

I can't speak for Walmart and Target, but the COVID supply chain disruptions caused my business and likely many others to over-invest in inventory because it takes longer to restock, and the inventory will sell at slimmer margins because I paid 2X+ the normal shipping rate to get it to the destination country. Many businesses are sitting on large amounts of inventory that can barely be sold at a profit. Now discretionary income is dropping, meaning demand and price points will fall. We have too much landed inventory we paid too much for and less people spending less to buy it. It's not pretty.

electrondood 4y ago
Exactly. Inventory is high because companies looked at the supply chain shutdown and thought "I'll load on up extra inventory, to hedge in case this happens again." Those prices are going to come down to entice the consumers scared off by inflation.

mdorazio 4y ago

From reading their investor statements it was more complicated than that. They overpurchased inventory of goods that saw lowering demand as people started going back to the office or spending money elsewhere as pandemic restrictions lifted. Ex. People shifted discretionary expenditures from TVs to vacations. Given how tight the labor market is I don’t think we’ve really seen the impact of overall lower discretionary spending yet - that probably won’t play out until this coming holiday season.