It’s Christmas For Retailers

As retailer after retailer posted their most recent earnings, and several facts told a story. Some retailers did not have enough inventory. Some retailers had too much inventory because they had ordered products customers didn’t want. Very few people outside these companies know whether these major problems can be fixed by the holiday season.

For most retailers, the holiday period, which begins in October or November, depending on who is measuring, makes most or all of their profits. October is one month away. Problems with inventory or foot traffic could be devastating.
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The largest retailer that misjudged the market was Target. Comparable store sales were up only 2.6% in the most recently reported quarter. The year before this figure rose 8.9%. Guidance was for annual revenue to be up low to mid-single. The “low” part of this will rely heavily on holiday activity.

Another retailer that reported carted sales was Best Buy. Revenue dropped from $11.8 billion in the year ago period to $10.3 billion. Comparable store sales fell 12.1%. Best Buy forecast the balance of the year would also be bloody.

Among the large retailers that took the worst pounding was Gap. Sales fell 8% to $3.86 billion. Comparable store sales were off 10%. Gap managed to lose $49 million against a profit in the same period a year ago of $258 million. Its largest brand, Old Navy, posted a drop in sales of 13% to $2.1 billion. The reason was common to other struggling retailers. “Sales in the quarter were negatively impacted by size and assortment imbalances, ongoing inventory delays, product acceptance issues in some key categories as well as slowing demand stemming from the lower-income consumer.“

Gap’s comments highlight another risk for retailers as they go into the holidays. There will be a recession soon, if one has not already started. And inflation has fundamentally made many Americans feel poor.

Merry Christmas to America’s retailers, if they can sort out their serious problems.
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