Shop Talk

Retailers, consumers and prices

Check Out Line: The good and bad of inventory reduction

August 11, 2008

shoppers.jpgCheck out how bad retail sales can actually mean good earnings.
 
It all comes down to inventory management. Retailers have aggressively cut inventory levels in order to cope with the slumping economy.
 
The bad news resulting from that strategy came last week when many retailers posted disappointing sales, in part because they had less goods on hand to sell.
 
“Our inventory levels in … clearance and transitional categories were significantly lower than last year, affecting sales results, but leading to improved gross margins,” Kohl’s Chief Executive Larry Montgomery said in a statement.
 
But the good news could come over the next several weeks, when retailers report second-quarter earnings. Those slashed inventories should have helped them preserve margins, which help profits.
 
So it’s not like the U.S. consumer is buying that much. But at least retailers didn’t get left with shelves of unwanted inventory.
 
Also in the basket:
 
Giant retailers look to sun for energy savings (N.Y. Times)
 
InBev seen posting modest profit growth in Q2

(Photo: Reuters)

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
  •