Home > Latest News > Stock Levels Critical As Black Friday Looms With RBA Holding Two Big Aces

Stock Levels Critical As Black Friday Looms With RBA Holding Two Big Aces

Retailers’ holiday planning is in full flight with many punting on Black Friday and “At least a reasonable” holiday shopping period to stave off a crash in sales.

Tomorrow’s Reserve Bank decision on interest rates and the possibility of two rises before Christmas is set to shape the retail market, as retailers fight to get back to some sort of normality, after a three year period that has been fraught with unpleasant supply-chain surprises, boom and bust trading that has seen the likes of Harvey Norman deliver a 13.9% fall in sales among their franchisees last quarter and The Good Guys a 12% fall.

In 2021, shipping delays meant retailers didn’t have enough stuff on their shelves to meet demand, then they had too much with the big issue now as to whether they have the right level of stock for Black Friday sales.

Several retailers made the mistake of over-ordering merchandise during the COVID pandemic as suppliers as came under pressure from factories facing processor shortages for CE and appliance goods.

This resulted in margin erosion which was evident in the recent Harvey Norman plunge in profits.

From January to September of this year, it has taken about 45 days on average to ship door-to-door from China to Australia with several brands forced to trans ship via Singapore during COVID as shipping Companies focused on European traffic with Australian seen as too small a market to prioritise. This resulted in shipping delays when it took as many as 70 days, according to a several shipping Companies that operate on the China Australia route.

From January through August, there was about 20% less import cargo volume at major container ports than the same period last year, according to the National Retail Federation and Hackett Associates. For the full year, NRF and Hackett are expecting import cargo volume to have declined 13% versus last year.

Shipping Companies operating into Australia estimate that shipments of retail goods are down around 17% with the latest financials for JB Hi Fi, Harvey Norman, Big W revealing that retailers are bringing their stock levels under control ahead of the peak buying period with many cutting inventories significantly.

Retailers that had big inventory glut problems have worked through the worst of them and are now looking for sales to clear the stock they are currently holding.

Retailers such as Big W, are pushing the risk back to distributors, by operating a consignment supply model, resulting in some suppliers refusing to supply the Woolworths owned retailer, others are expected to refuse to supply on consignment in the New Year if sales are slow during the holiday period.

Lorraine Hutchinson, retail-sector equity analyst at BofA Global Research said, “Our view is that inventory is much better positioned than last year,”

A big plus over 2022 is that shipping rates have fallen by over 40% with suppliers and retailers benefitting from holding the margins up to recover lost profits.

Worth watching are retailers whose inventory has outpaced their growth in sales with some retailers appearing to be carrying “excess” stock running into Black Friday sales.

As one key retailer said, “We are all punting on Black Friday sales, if that is soft or fails to deliver Christmas sales could be a disaster”.

On the other side of the issue if Black Friday releases spending many retailers and suppliers could be in for a pleasant margin surprise in the last quarter.



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