Too much stuff
America's biggest retailers have a new problem to go along with supply chain inflation and a tight labor market — too much stuff.
Target announced yesterday that it was basically holding a lot of stuff that no-one wanted anymore, meaning the inventory on its balance sheet had grown substantially on this time last year (up 43%). Large appliances, furniture and comfy clothing are all out as consumers reportedly switch up their purchases towards travel, cosmetics and clothes-that-aren't-sweatpants.
If you happen to be a shareholder in a major retailer with an inventory problem, this is bad news. The only real way to shift huge volumes of merchandise that aren't in demand is to discount it — which is why Target's announcement dragged stocks lower yesterday. Target's shares have now lost 33% of their value year-to-date. Walmart has shed 15%.
The upside is if you're in the market for home goods like patio furniture, appliances or large electronics there's a decent chance your local Target will have a sale in the near future, as the retailer looks to shift some of that older inventory — a process that will eat into its margins for the coming quarter.
