The likes of Kohl’s have indicated that they will either cut down or cancel orders to keep abreast of inventory accumulations. Hence, department and big-box store retailers deal with excesses in certain discretionary categories such as apparel. Meanwhile, consumers are pivoting towards non-discretionary categories. Some have reported cancellations to avoid build-ups in warehouses and stores. This comes at a time when retailers like Target continue canceling orders to manage excess inventory that was accumulated over the previous quarters. However, shares rose more than 5% on the trading day and hit nearly $139.37 per share. Additionally, Walmart projected an 8-10% decline in operating income and a 9-11% fall in earnings per share. Operating income was $6.9 billion, an annual fall of 6.8%.Ī 5% annual increase in net sales was projected for the 3 rd quarter. Revenue was $152.9 billion, representing an 8.4% annual increment, when adjusted for currency fluctuations. For example, earnings per share were $1.77, up from $1.60. Nevertheless, 2 nd quarter financial results were a significant improvement in the 1 st quarter. Most of the inventory inflation was linked to the 4 th quarter when arrivals exceeded sales. Meanwhile, sales rose by 4.1%, meaning, inventories were drawn down. The seasonally adjusted (except for inflation) product arrivals for Walmart increased by 0.1% in the 2 nd quarter compared to the first. The market responds to inventory controls (NYSE: TGT)., a rival retailer facing similar inventory challenges and adopting a similar corrective response. However, it is notable that the drop for Walmart is not as bad as that experienced by Target Corp. Nevertheless, its latest actions have negatively impacted the company’s gross margins. In effect, sales are beginning to outpace order arrivals. Professor Jason Miller of the Eli Broad College of Business (Michigan State University) indicates that seasonally adjusted days-turn-inventory for Walmart has fallen to 44 days in the 2 nd quarter compared to the 46 days in the previous quarter. Although progress has been made in right-sizing inventories, it may take at least three quarters to eliminate the accumulated imbalances. Walmart is also prepping for the upcoming holiday season. Executives indicated that the brand had cleared out most of its summer seasonals in preparation for the school year return, which has already started in many Southern states. Having recorded a 750-basis-point improvement following a challenging fiscal 2023-year 1 st quarter, this is a break from when the brand (NYSE: WMT) was blindsided by higher-end inventory being rejected by inflation-avoiding customers and exponentially rising costs. This information raises questions about the implications for supply chains, logistics, and customers. For example, the US division reported 26% in inventory levels for the fiscal 2 nd quarter of 2023 compared to the same period in the fiscal 2022 period. All this comes amidst a flurry of important financial health news for Walmart. Specifically, Walmart wishes to reduce its exposure to those products its budget-conscious consumers no longer favor. Although surprising to some, the company states that it is part of a concerted and ongoing effort to align Walmart’s inventory levels with the projected demand. Apparently, this move is designed to right-size inventory levels. News on August 16 is that Walmart has canceled orders worth billions of dollars. Implications for logistics and the supply chain
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