Retailers typically offer sales around Labor Day to prepare stores for the pivotal holiday season. This year, however, there are more pre-Labor Day sales than in previous years due to an issue plaguing retailers in the industry: excess inventory.
“We’re seeing a lot of promotional activity this Labor Day, probably more than we’ve seen in years,” said Mark Mathews, vice president of research development and analytics at the industry for the National Retail Federation (NRF), at FOX Business. “It’s through a full spectrum of retailers.”
In 2021, retailers saw huge demand. Retail sales jumped 14% year over year, which is “absolutely unprecedented”, especially compared to the pre-pandemic period when the average retail sales growth was around 3, 7%, according to Mathews.
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Retailers were ordering a lot of goods to keep up with demand, however, supply chain disruptions caused significant delays for a range of products. By the time they finally hit shelves, consumer habits changed as people once again swapped workout clothes for work clothes, and demand waned due to a spike in inflation. .
Even in pre-pandemic times, it was difficult to predict what consumers want, but “in post-pandemic times, there’s no pattern at the moment,” Mathews said.
Macy’s and Nordstrom recently announced that there was a massive amount of unsold inventory, forcing companies to resort to steep discounts just to get rid of it.
“Promotional markdowns intensified in July due to increasing price competition in the industry as all retailers work to eliminate excess inventory,” Macy’s CEO Jeff Gennette told analysts during of an earnings call earlier this month.
Macy’s has reduced orders where it can to better synchronize with customer demand, but Gennette said inventory in some categories remains high. The company is cutting prices on seasonal products, private labels and pandemic-related merchandise like casual clothing and home furnishings to clear it, he said.
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Similarly, Doug McMillon, CEO of Walmart, which also owns and operates Sam’s Clubs, told analysts on a recent earnings call that there was “above-normal markdown activity to offset excess inventory.” during the quarter.
Kohl’s CEO, Michelle Gass, also told analysts the company had increased promotions and “was aggressive in clearing excess inventory.”
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Mathews noted that some retailers will be more stocked than others, meaning not all stores will offer the same sales.
“There will be a lot of variability as to which retailers have the best deals on specific products,” he said.
However, consumers are more likely to find sales on non-essential items as they focus on buying only the products needed to fight inflation. Consumer prices jumped 8.5% in July from a year earlier.
Additionally, many sales are also “loaded” onto loyalty programs to benefit members, in particular, Mathews added.
Anything in excess right now will also not be refreshed. Some retailers see this additional inventory as a positive approach to the holiday season, especially since previous years’ inventory levels were relatively low at this time, Mathews added.
“Part of that [excess inventory] going to be kept and stored and made available over the holidays,” he said.
The Associated Press contributed to this report.