For a couple of reasons, US retailers are seeing rising inventory levels.
First, miscalculation of consumer demand in an perod of inflation and shopping patterns returning to pre-pandemic norms, leaving some retailers with excess apparel items and household goods, for example.
Second, after two years of supply chain delays and low inventory levels, some retailers such as Lowe's and Dick's, are embracing higher inventory levels to drive revenue with fully stocked shelves.
The graphic below tells the tale, with the Inventory-to-Sales (ITS) in the general merchandise retail sector rising steadily from mid-2020 until just past few months. ITS is calculated by diviing inventory levels by one month of sales.
Source: Wall Street Journal
“We’re really thrilled that we have in stock for Q4 inventory for the first time in a few years that’s going to be robust,” Lauren Hobart, chief executive officer of Dick’s, said on an earnings call Nov. 22.
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