The average amount of inventory held by the 20 biggest public apparel companies in the US was up 26% to $2.1 billion in the third quarter of this year versus pre-pandemic levels in 2019, according to an analysis by consultancy AlixPartners of S&P Capital IQ data. The figures are unadjusted for inflation. And the average inventory held was up 30% versus the same period last year.
Executives at brands including VF Corp., the owner of Vans and North Face; Guess? Inc.; and Hanesbrands Inc. have talked in their most recent earnings calls about the pullback from their wholesale customers — whether those are small boutiques or large department stores. “Many of our wholesale customers had warehouse constraints that limited their ability to take delivery of new product during the quarter,” La-Z-Boy Chief Financial Officer Bob Lucian told analysts during a Dec. 1 earnings call.The buildup of inventory is a consequence of supply-chain problems in 2021 that delayed the arrival of many holiday shipments until the spring, just as rising inflation forced consumers to downshift their spending. Companies including Target Corp., Walmart Inc.
Cosaro and some other suppliers say demand has been robust for their products when they send the items directly to consumers on behalf of a retailer, a process known as drop shipping. Retailers have been leaning more on some suppliers to handle shipments to avoid having to hold the inventory themselves or delaying orders, forcing suppliers to store the merchandise.Article content
“The cost of money and capital is on us,” said Thomas Nichols, president of Pretika Corp., which manufactures and distributes skin-care devices to retailers. “We’ve been ordering less and yet we still have high inventory levels.” Nichols said he’s producing less in order to enter 2023 with lower inventory levels. Storage has become more expensive as US interest rates have gone up and as demand for warehouse space has outpaced supply.
That’s just what the Fed ordered, US economy is f’d
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