Stocks are starting to pile up at Australian retailers as Samsung has stopped making LCD TVs due to excess inventory in the chain.
Major retailers such as Walmart, Target and Big W are currently reducing inventory as sales lead to good deals for consumers.
“It’s a far cry from where we were earlier in the year,” said a Harvey Norman franchisee.
Despite the buildup in inventory due in part to slowing sales, there are still shortages of high-end TV refrigerators and other electrical appliances, a Bing Lee executive said.
In the United States, inventory levels are so bad that stores such as Kmart, Target and Walmart where third-party companies are being bought to offload inventory as inflation soars and consumers stop buying
According to the Wall Street Journal, companies such as Liquidity Services and Xcess Limited are being urged to eliminate a glut of kitchen appliances, televisions, outdoor furniture and clothing that big chains are trying to eliminate.
In many cases, liquidators collect pallets from ports or a warehouse without the goods reaching store shelves and sell the items to smaller retailers and individuals who resell them online.
“What’s unusual is that big retailers may never touch the goods,” said JD Daunt, chief commercial officer of Liquidity Services, which operates online marketplaces.
“They are asking us to address this earlier than in the past. There is an unusual amount of excess inventory, and it’s affecting so many retailers at once. »
At the start of the Covid-19 pandemic, when many stores were temporarily closed, retailers canceled 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 further increase in store visits with new inventory ordered, this was before interest rates were lifted and inflation spiked.
Supply chain bottlenecks due to factory backlogs and shipping and postage delays caused several retailers to shift to compensate, they ordered additional inventory while placing orders further afield. ahead to make sure the products arrive on time.
This has left retailers with overstock claim watchers, resulting in several offer offers, Harvey Norman is offering 60 months of interest-free purchases.
Consumers have also stopped buying the leisurewear and home items they bought at the height of the pandemic and shifted their spending towards dressier clothes as well as travel and entertainment.
At the same time, inflation is driving up the costs of basic necessities such as food and gasoline, leaving less money for discretionary items, say analysts who have decided to cut retailers’ stock in anticipation slowdown in sales and pressure on margins.
Last June in the United States, Target warned that profits would be hit as it canceled orders from suppliers and offered discounts to get rid of excess goods.
What retailers are banking on is that the robust sales reported for May will continue through the end of the year as consumers spend savings while allowing them to return to normal inventory levels.
Retail sales rose for a fifth straight month to a record high in May despite the Reserve Bank of Australia raising the official interest rate for the first time in more than a decade.
Retail sales rose 0.9 in May from April, topping $34 billion for the first time, and jumped 10.4% in lockdown-hit May 2021, said the Australian Bureau of Statistics. Sales are now 23% higher than they were before the pandemic.
Risks are also partially mitigated by high household savings of around $250 billion, JPMorgan analysts Bryan Raymond and Chris McKegg said.
“The optics around year-over-year declines will clearly be important given the very high base, but we expect the lower sales and margin levels in fiscal 2024 to be better than what stock prices factor in,” they said, adding that Australian retailers underperformed their global peers in stock price terms.
They cited a preference for “heavily discounted discretionary retailers” such as Super Retail Group and Harvey Norman “with buffers built for further downgrades.”
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