Walmart Clears Out Summer Inventory

Retail

Published: August 17, 2014 9:16 am

Last Updated: August 18, 2014 6:49 am

Wal-Mart Stores Inc. (NYSE: WMT) has started to clear our summer inventory using e-commerce to augment what it is doing in its stores. By Labor Day, many items will have lost their warm weather appeal, and the world’s largest retailer does not want to be stuck with them. On the other hand, Walmart may offer discounts so low that dumping inventory could cause financial losses.

Among the items being pushed most aggressively at Walmart.com are patio sets, the prices of which start at $298.50; clothing, which starts at $7; and swimming pools, which start at $109.

Walmart management may believe its does not have much choice as summer ends. Same-store sales in the United States have become stagnant. Labor Day is an important sales period. Along with back-to-school sales, the end of the season is the last chance to bring in shoppers before the holiday season.

Walmart’s second-quarter earnings showed the problems the retailer has with driving store traffic:

Walmart U.S. comp sales were flat for the 13-week period ended Aug. 1, 2014. Comp sales for the Neighborhood Market format rose approximately 5.6 percent. Walmart U.S. net sales increased $1.9 billion, or 2.7 percent, to more than $70 billion.

And margins are already razor thin. Walmart U.S. made only $5.3 billion in operating income on $70.6 billion in revenue in the most recently reported quarter. So, traffic is not Walmart’s only problem.

As usual, Walmart has plenty of outside pressure as it tries to sell off summer inventory. Ever other major retail is doing the same, so pre-Labor Day tactics are part of the marketing effort of scores of chains. Fortunately, e-commerce giant Amazon.com Inc. (NASDAQ: AMZN) is promoting back-to-school products, but it has not introduced Labor Day and end-of-summer sales as part of its primary lures to buy products at Amazon. It has decided it is better off pushing its new Kindle Fire smartphone.

Walmart is stuck between a rock and a hard place — too much inventory and too little margin.

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