U.S. retailers fill store shelves with leftover holiday inventory

NEW YORK, NY, Oct 19 (Reuters) – The ghost of Christmas past is haunting US store shelves, sales floors and warehouses this year.

Retailers had $548.8 billion in inventory in July, an increase of 21.6% from last year, according to US Census data.

With less than 10 weeks to go until Christmas 2022, major retailers including Costco, Kohl’s and Express Inc. are selling Christmas sweaters, artificial trees and other decorations that got stuck in transit or packed in warehouses during the chain’s downturn. of supply that threw a monkey wrench. at Christmas 2021.

While keeping last year’s products is not ideal for retailers, the discounts will be a boon for consumers under pressure from inflation, which hit 8.2% in September.

“This year is going to be a fantastic year to buy a tree,” said Chris Butler, CEO of the National Tree Company. “Everyone is going to be trying to go through the inventory they have to make sure they clean up a little bit before the 2023 season.”

Last year’s holiday-themed pajamas are available on Kohl’s shelves for 25% off at $39. And clothing retailer Express Inc. is putting its excess Christmas items and New Year’s Eve dresses in its outlets, the company said during the Wells Fargo Consumer Conference in September.

In recent years, retailers spent heavily to bring in hard-to-find toys, shiny gadgets and trendy clothing that merchandise shoppers felt would draw shoppers into stores.

But this year, some have scaled back their purchases of new merchandise, while others have focused on clearing out old inventory.

Retailers are betting that shoppers won’t mind choosing between 2021’s discount décor and styles. But Liza Amlani, director of consultancy Retail Strategy Group, said there’s a chance shoppers will lose interest when they feel that some of last year’s hot products “are no longer relevant.”

Even with retailers cutting prices by as much as 40%, shoppers so far this year are hesitant to make major holiday purchases.

Online prices for electronics, toys and clothing fell in September, according to Adobe’s Digital Price Index, as retailers offered deals to attract early holiday shoppers and get rid of inventory ahead of Black Friday, the day after Thanksgiving, when many Americans traditionally shop for gifts. .

Rising markdowns and slowing consumer demand may weigh on companies’ gross margins, Cowen retail analyst John Kernan said in an October note. Excess inventories also increase retailers’ storage costs.

Kohl’s and Express reported gross margins of 33.05% and 39.6% on their second-quarter earnings calls in July, while Costco’s fourth-quarter margins came in at 11.84% in August. Analysts expect gross margins to shrink for each of the companies next quarter, according to Refinitiv data.

Costco is filling its floors with faux fir trees from days gone by.

“If you add the cost of holding them and a little interest cost, I think they’re still a little bit cheaper than what we added to inventory this year,” Chief Financial Officer Richard Galanti said in a September call with investors. .

“The good news,” he said, “is that (Christmas trees) don’t really change styles.”

Reporting by Arriana McLymore and Doyinsola Oladipo in New York Editing by Claudia Parsons

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