Shoppers are starting to see Black Friday discounts pop up early this holiday season, and they may start to encounter even more than usual with steeper price cuts.
This is due to a plethora of retailers such as Target TGT, Walmart WMT, Ulta Beauty ULTA, Dollar General DG, etc., struggling with an excess amount of inventory for the second year in a row, according to an analysis from Reuters, spelling trouble for retailers and investors.
As the result of most likely miscalculating consumer spending amid high inflation and interest rates, retailers are stuck with an overabundance of merchandise in their stock rooms which is skyrocketing retailer costs for transporting and storing goods.
Inventory turnover ratios, which show the amount of times a company sold or used its merchandise, were analyzed in the data from LSEG Workspace which reviewed ratios from 30 retailers. Dollar General had the lowest ratio of them all at -1.9, which is behind the average 0.9 its peers had at the end of the second quarter this year.
Walmart was found to significantly lag behind its peers. It had a ratio of -0.7 compared to the 2.1 ratio from other stores in the same industry. Also, Ulta Beauty had a ratio of -0.2, compared to the 0.8 ratio the store’s competitors had.
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It appears that retailers will face a continued struggle clearing out their inventories this holiday season as consumers are planning to spend even less for the holidays compared to last year. According to The Conference Board’s new Holiday Spending Survey, consumers plan to spend an average of $985 on holiday items this year, which is less than the average of $1,006 in 2022.
The survey also found that shoppers are also expected to slash their budgets for other holiday items that are not gift-related this year. $330 is the average amount consumers plan to spend on items this year, which is a 16% decline from $393 average in 2022.
“October’s Consumer Confidence Index suggests Americans are entering the holiday season in a somewhat cautious mood, with the overall, present situation, and expectations indexes all seeing dips,” said Dana Peterson, chief economist at The Conference Board, in the press release.
The excess in stock can be beneficial for shoppers looking for steep deals on items. As retailers are struggling to sell their crowded inventories, deals and discounts are set to become more prevalent towards the end of the year to help drive up sales.
In a new CNBC Supply Chain survey that questioned executives who manage freight manufacturing orders and transportation, 67% of retailers are moving more promotional, lower-cost items into stores for the holiday season, and 83% are planning to not move higher-priced items amid a growing concern in consumer spending cutbacks.
