On Better Managing Inventory at Retail

The Wall Street Journal reported yesterday on efforts by CFOs of apparel retailers to reduce inventory, rent, close stores as needed, and have fewer promotions to drive up profitability .

From WSJ: “Clothing chains including American Eagle Outfitters Inc. and Abercrombie & Fitch Co. , which primarily target teenagers and young adults, are adjusting their business models after a year in which many of their stores were temporarily closed due to the coronavirus pandemic. Online sales as a proportion of revenue continue to grow, which reduces the need to hold as much inventory and operate as many stores as before the pandemic.”

More from WSJ: “General and specialty retailers on average held 69 days of inventory outstanding in 2020, down from 72 in 2019, according to Hackett Group Inc., a consulting firm which reviewed the 1,000 biggest nonfinancial U.S. companies by revenue. Internet and catalog retailers last year on average had 39 days of inventory outstanding, compared with 48 in 2019.”

Quick Take: Wanted to reference inventory levels, comparing brick and mortar and internet selling. As the article states, and I can concur, we’re in an era of less is more at retail. Between supply chain bottlenecks, inflation, freight costs, and COVID era consumer demand, retailers are challenged to better manage inventory, and see a window for margin and profit gains, while focusing on impulse sales, with products at higher prices.

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