Walmart, Target and other major U.S. retailers are canceling billions of dollars in orders ahead of the coming holiday season as part of their aggressive actions to manage inventory excesses that have accumulated in the last few quarters. Analysts say this is a replay of a strategy used at the start of the Wuhan coronavirus (COVID-19) pandemic.
Michael Snyder of the Economic Collapse blogsite said that this does not make any sense at all, especially now that the world has eased out pandemic restrictions.
“The holiday season is typically the busiest time of the year for retailers and at this time in 2021 there was actually a great deal of concern that there wouldn’t be enough inventory due to global supply chain problems,” Snyder said in a blog entry. “All of a sudden, major retailers are feverishly canceling orders and this would only make sense if a severe economic downturn was imminent.”
Walmart’s EVP and CFO John David Rainey said in August that their company canceled “billions of dollars in orders” to realign inventories. The multinational retail corporation also cleared most summer stocks and was reducing exposure to electronics, home and sporting goods. (Related: Walmart cancels billions in orders to align inventory with plummeting consumer demand.)
Rainey said: “Our actions in Q3 will allow us to make significant progress toward rationalizing absolute levels and mix, which will enable our stores to be well positioned ahead of the holiday season.”
Meanwhile, Target has also canceled “more than $1.5 billion” in orders. Christina Hennington, the company’s EVP and chief growth officer, noted that the steps being taken by the discounter’s buying team include rigorously reforecasting expectations for the balance of the year and beyond and determining where to reduce future receipts and orders.
“In some cases, it meant working with vendor partners to reduce our fall receipts in light of our updated expectations. It also meant quickly building compelling promotional plans to drive unit velocity for products we already owned, all with a focus on providing great value and generating excitement for our guests,” she said.
Kohl’s has also called off on order receipts and increased promotions to get through an inventory glut. “We have taken action to address inventory, including increasing promotions, being aggressive on clearing excess inventory and pulling back on receipts,” Kohl’s CFO Jill Timm said during a call with investors.
Interim President and CEO Colin Browne said Under Armour also made some proactive cancellations to ensure that “the right inventory was coming in at the right time.”
Less foot traffic at Walmart as shoppers resort to more affordable options
Meanwhile, budget shoppers are resorting to cheaper local options such as dollar stores amid surging prices everywhere.
According to Reuters, foot traffic declined by 2.7 percent at Walmart branches rom June 1 through July 25 compared to the same time last year. In contrast, discount stores ALDI and Dollar General saw an 11.5 and 4.1 percent increase in foot traffic, respectively.
The news outlet further said the convenient locations made the discount stores more favorable for consumers looking to save money on gas.
“Gas prices at $5 per gallon are leading some customers to focus on driving to stores located closest to their homes,” said DG CEO Todd Vasos. “This is an advantage for Dollar General, which has around 19,000 stores and is often the only retailer in some rural towns.”
DG has widened its product selection to reflect an increase in sales from its core demographic of families making $40,000 or less per year, CNN Business reported.
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