Inventory Clouds Retail Landscape

Inventory has been building at retailers in the United States, and that snowball effect could hurt profits going forward, Reuters reported on Friday (May 20).

That news comes as sales were already less than stellar across the industry in the first quarter. The inventory runs the gamut of electronics, clothes and accessories and may still not be moving. As a result, noted the newswire, markdowns may still be in the offing, which implies still more profit drag. The overarching theme is that consumers are remaining fickle when it comes to discretionary buying. The same-store sales ennui has hit a broad swath of retailers, including Target, JCPenney, Kohl’s and Macy’s, among others. The latter company saw its shares plummet by 15 percent mid-week after sales were below consensus and the firm cut guidance.

From figures provided by analytics firm Dynamic Action, retailers did indeed sell fewer goods at full price in the latest quarter; in fact, the tally was down 4 percent. The online channel saw a lot of promotional activity, with a 63 percent jump in items thus categorized in the quarter. The monthly high was reached in March, with 86 percent growth year over year.

In an interview with the newswire, one analyst, Brian Yarbrough, with Edward Jones, said that retailers have been cutting back on deliveries slated for the third and fourth quarter of this year and that could hurt results in the all-important fourth quarter, where as much as 40 percent of annual sales are loaded.

The news has not been all bleak, with some positive reports and commentary coming out of the sector from the likes of Walmart. Lower-income shoppers spent more money at the retailer. The housing recovery has also helped to lift firms such as Home Depot.