Report: Retailers Lowering Prices to Mitigate Rising Surplus Inventories

While only a few months ago U.S. retailers were scrambling to fill their shelves due to supply chain delays, many are now facing inventory surpluses and having to discount unsold goods, according to a Reuters report. Average retail inventories have been rising quickly, too. The Reuters article cited research from Citi that found 11 of the 18 retailers’ first quarter results it tracked saw inventories rising by 10 percent over how sales had been doing — the biggest gap since the pandemic began. Indeed, Target, Walmart, Best Buy, Urban Outfitters and other top retailers have said in recent weeks that they're sitting on too much inventory for some of their products. As a result, they plan to mark down prices and step up sales on those items to clear the glut.

Macy’s CFO warned of an “elevated promotional environment."  According to Reuters, retailers bought more merchandise than usual during the supply chain crisis just so they would have enough for shoppers who had savings and stimulus funds from earlier in the pandemic. However, high inflation and prices have caused shoppers to back away from big spending. Thus, an overabundance of inventory looms.

Total Retail's Take: Excess inventory woes — and a hyperpromotional environment — are giving retailers new concerns, alongside other issues they're still tracking closely, including soaring gas prices, inflation, and a rise in COVID-19 cases in certain pockets around the country. Retail trends are in flux, however, with other reports saying spending in department stores and discount chains has been rising even in spite of the more broad supply chain and economic issues. In fact, Macy’s, Dollar Tree and others have recently reported strong sales.