At the height of the pandemic, the global supply chain was in disarray. Brands regularly found themselves waiting months for shipments to arrive, then dealing with mountains of excess inventory that arrived too late. But now that many of those problems have abated, another issue is rearing its head: Inflation and reduced consumer spending are causing brands headaches, when it comes to planning their inventory buys.
This is true of athleticwear brands including Nike and Foot Locker. Nike’s stock has been suffering an uncharacteristically negative period, declining for a record 10 straight days as of August 23. Analysts cited a continued inventory glut at Nike as the main cause.
Foot Locker, which reported quarterly earnings on August 23, showed declining sales of 10%, owed to a reduction in spending on consumer goods and an excess of inventory.
Large retailers like Macy’s are also feeling the inventory pressure, requiring them to offer deep discounts to move through product. In its earnings report on August 22, CEO Jeff Genette said these discounts have been successful at reducing overall inventory levels, but make it more difficult to accurately predict buying levels for future seasons.
“While second-quarter results largely exceeded our expectations, they were promotional and markdown-driven, which makes it difficult to decipher any potential shifts in consumer health,” Genette said. “As we plan the remainder of the year and we think about 2024, we remain cautious on the pressures impacting our customer, especially at Macy’s where roughly 50% of the identified customers have an average household income of $75,000 or under.”
But the impact on inventory planning from inflation and reduced consumer spending is slower and easier to deal with, compared to the overnight chaos that was the early pandemic years, according to Nadia Hruska, director of merchandising and inventory planning at underwear brand Harper Wilde.
“Inflation is a slower burn, which lets us adjust accordingly,” Hruska said. “With something like consumers pulling back on spending, you can anticipate it more and it happens gradually. [But during] Covid, everything changed literally overnight.”
Hruska said the chaos of the pandemic years helped Harper Wilde prepare for a more volatile inventory planning situation. The company swapped its ratio of air and sea shipping from 70/30 favoring air to 70/30 favoring sea. Sea freight is comparatively slower, but also more affordable and less prone to delays than air freight, especially since the congestion at U.S. ports finally cleared up at the end of 2022.
That change has helped improve Harper Wilde’s weekly inventory turn rate — or the speed at which inventory is sold through and new inventory arrives — by 70%, Hruska said.
