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Inventory Levels At Retailers Rising As US Retailers Dump Excess Stock

Inventory is starting to build up at Australian retailers while Samsung has stopped manufacturing LCD TV’s due to excess stock in the channel.

Large retailers such as Walmart, Target and Big W are currently discounting stock out with sales leading to bargains for consumers.

“This is a far cry from where we were earlier in the year” said a Harvey Norman franchisee.

Despite the inventory build-up due in part to slowing sales there are still shortages of premium TV’s fridges and other electrical goods a Bing Lee executive said.

In the USA, the inventory levels are so bad that stores such as Kmart, Target, and Walmart that third party Companies are being bought in to dispose of stock as inflation soars and consumers stop buying

According to the Wall Street Journal Companies such as Liquidity Services and Xcess Limited are being asked to clear a glut of kitchen appliances, televisions, outdoor furniture, and apparel that major chains are trying to clear out.

In many cases, the liquidators are picking up pallets at the ports or from a warehouse without the goods ever hitting store shelves and are selling the items to smaller retailers and individuals who resell them online.

“What’s unusual is the large retailers may not ever touch the products,” said JD Daunt, chief commercial officer of Liquidity Services, which operates online marketplaces.

“They are asking us to get in front of this earlier than in the past. There is an unusual amount of excess inventory, and it’s affecting so many retailers at the same time.”

At the onset of the Covid-19 pandemic when many stores were temporarily closed, retailers cancelled orders from overseas suppliers as shoppers worked from home.

Then consumers started buying online and new orders were placed with suppliers.

Then, as the economy started to open up, they saw a new surge in store visits with new stock ordered this was prior to the lifting of interest rates and a surge in inflation.

Supply-chain bottlenecks due to factory backlogs and shipping and port delays saw several retailers move to compensate, they ordered extra stock while also placing orders further in advance to ensure that products arrived on time.

This has left retailers with excess stock claim observers resulting in several offering deals, Harvey Norman is offering 60 months interest free shopping.

Consumers has also stopped buying leisure clothing and home items that they bought during the height of the pandemic and shifted more spending to dressier clothes as well as travel and entertainment.

At the same time, inflation is pushing up the costs of necessities such as food and gas, leaving less money for discretionary items claim analysts who have moved to mark the stock of retailers down in anticipation of slowing sales and pressure on margins.

Back in June in the USA Target warned that profits would be hurt as it cancels orders with vendors and offers discounts to get rid of excess merchandise.

What retailers are punting on is that robust sales reported for May continue until the end of the year as consumers spend savings while allowing them to get back to normal stock levels.

Retail sales rose for a fifth consecutive month to a record high in May despite the Reserve Bank of Australia lifting the official interest rate for the first time in more than a decade.

Retail sales climbed 0.9 in May from April, exceeding $34 billion for the first time, and surged 10.4 per cent on the lockdown-hit month of May 2021, the Australian Bureau of Statistics said. Sales are now 23 per cent higher than before the pandemic.

Risks are also partially mitigated by elevated household savings, sitting at around $250 billion, said JPMorgan analysts Bryan Raymond and Chris McKegg.

“The optics around year-on-year declines will clearly be large given the very high base, but we expect the trough sales and margin levels in the financial year 2024 to be better than share prices are factoring in,” they said, adding that Australian retailers have underperformed their global peers in share price terms.

They cited a preference for “deeply discounted discretionary retailers” such as Super Retail Group and Harvey Norman “with buffers built for further downgrades.”


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