O My This week joined a list of clothing retailers reporting dismal earnings as the industry worked to figure out what kind of items people wanted out of the pandemic, while also facing demand. decrease when inflation tightens the budget.
To clear products off store shelves in the meantime, retailers including Macy’s and Nordstrom have turned to discounts that are cutting profits.
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“The retail environment is not nice,” Jeffries analyst Corey Tarlowe told CNBC. “Inventory has been running high. There’s billions of dollars in excess apparel inventory floating around right now and that’s a problem.”
On Wednesday, American Eagle said it was pausing its dividend after comparable sales in the latest quarter fell 6% from a year ago. CEO Mike Mathias pointed out that “demand is slowing down” caused by the macroeconomic environment. Jen Foyle, the company’s chief sales officer, said American Eagle’s priorities were “to fine-tune our assortment and claim inventory.”
The need for a discount to move inventory hurt American Eagle’s profits, with the company posting earnings of 4 cents per share for the quarter ended July 30. That number was down from 13 cents per share that analysts expect.
On Thursday, Nordstrom Chief Financial Officer Anne Bramman also said at the Goldman Sachs Global Retail Conference that the discount was “a lot deeper” than the company expected and could “take a couple of quarters”. ” to adjust accordingly. The department store operator in August reported stronger sales gains for its second quarter, but cut its financial forecast for the year citing excess inventory and slowing demand at the end of the quarter.
Last month, rival Macy’s also slashed its revenue and earnings forecasts for the year, with Chief Financial Officer Adrian Mitchell noting “apparel sales weakened in the quarter as consumers faced higher costs.” At the Goldman conference on Thursday, Mitchell said the company has “made the necessary discounts” to help clear inventory.
Other retailers include Wal-Mart, Target, Distance and Kohl’s have faced similar problems with overcrowded inventory. Target cited deep discounts to eliminate excess inventory when it reported a 90% drop in quarterly profits in August. Chief Financial Officer Michael Fiddelke said there was “softness” in clothing and other discretionary categories.
Realizing a consumer hedged against inflation, Wal-Mart hired same positive mark to move items like clothing out of the store, which led to a significant cut in profit expectations.
Meanwhile, Gap and Kohl’s are looking to avoid some of the price drops with a “pack and hold” strategy on certain items, allowing them to stockpile excess inventory until demand increase.
By 2023, analyst Tarlowe said retailers could adjust to demand faster as supply chains normalize. But for now, he said, companies are finding it difficult to tailor their services.
“All those products that were originally ordered for the light and cozy trend are now coming into play. These retailers have stuck with it. They’ve been forced to get rid of it,” says Tarlowe. incorrect directory”.
