As Retailers Get Ready To Report, All Eyes Are on Inventory

Most Important Metric

Holiday season is an intense focus for retailers. With most people buying gifts for friends and family within this two-month period, it’s unquestionably paramount to retailers’ success.

Managing inventory levels is a unique challenge, requiring retailers to anticipate trends and demand. But in the wake of the COVID-19 pandemic, properly maintaining inventory is especially challenging. Retail experts say inventory is a factor every holiday season – but this year it’s the biggest factor of all.

During the pandemic’s early stages, things like coffee makers, laptops, and loungewear flew off the shelves. Habits have now shifted, and that same merchandise is collecting dust in storage. Major retailers like Walmart (WMT), Target (TGT), Gap (GPS), and Kohl’s (KSS) are scrambling to clear up space for a fresh start in 2023.

Crowded Shelves, Cranky Shoppers

Big picture, this situation provides shoppers with an opportunity to save some cash. Retailers are prepared to accept lower profit margins by marking items down for sale, and hopefully enticing consumers to buy. You’re likely to see apparel, home goods, electronics, and even furniture and appliances available at a discount this season.

But smaller profit margins might not be retailers’ only challenge in this environment. Plainly stated, having too much stuff makes for claustrophobic shopping. Customers have reported feeling overwhelmed by crowded stores and aisles. This could lead to more online shopping, further harming in-person retail, and boosting companies like Amazon (AMZN).

(Early) Black Friday

Some sectors are likely to offer more significant discounts, namely apparel. If you’re shopping for clothes this holiday season, companies like American Eagle Outfitters (AEO), Under Armour (UAA), and Victoria’s Secret (VSCO) all report their prices are lower than at this time last year.

In fact, many retailers have already started offering big sales, even though Black Friday is over a week away. Companies felt little pressure to offer price breaks last year given the supply chain challenges that made products scarce. So, depending on what you’re looking for, visions of holiday savings may be dancing in your head — provided you can handle the jam-packed stores.

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