As shoppers, we’re always looking for a deal…
When you’re in a store, it’s thrilling to see a big discount on a shirt or jacket you’ve had your eye on. And it’s rewarding to get the bedding set you’ve wanted for much cheaper.
But for the past few years, bargains were hard to find…
During the COVID-19 pandemic, a lot of major retailers stepped back from offering sales.
Product shortages and supply-chain issues were the main culprits. In China, many factories weren’t even open. Heck, China’s “zero COVID-19” policy is still a constraint to this day.
Even the biggest sales time of the year changed…
“Black Friday” became a multiday event. Many retailers started spreading out their deals to limit the crowds. And now, the once-crushing rush of people feels like a ho-hum affair.
For me, it seems like any good sales happened a lifetime ago. And I bet you feel similarly. Think about it…
When was the last time you got excited about a good deal in a store?
Fortunately, I have good news… That’s all about to change.
Folks, this year’s holiday season is going to be a big one. And as I’ll explain today, it starts with some of the top names in retail…
Nordstrom (JWN) and Macy’s (M) both reported second-quarter earnings in late August. And as part of that, both department-store chains cut their annual earnings expectations…
Both companies cited a drop in demand from their customers.
In short, the post-pandemic “revenge spending” is over. And now, American consumers are feeling the squeeze of inflation.
A drop in demand means shoppers want fewer goods. But it tells us something even more important…
Many retailers now have excess inventory.
A lot of companies bought more inventory than they should have. They assumed that consumer spending would sustain itself in the post-COVID-19 world.
And now, they’re stuck with too much stuff…
Nordstrom’s inventory was 10% higher at the end of the second quarter over the previous year. And Macy’s had 7% more inventory over the same period.
Higher inventory means less space for retailers to sell their other, newer products.
It’s an industrywide problem. Check out this alarming chart from the U.S. Census Bureau of year-over-year change in retail-inventory levels since the early 1990s…
![](https://chaikinpowerfeed.com/wp-content/uploads/2022/09/091922-CPF-Retail-Inventories-in-the-U.S..png)
As you can see, year-over-year inventory growth is at its highest level in that span.
That’s important…
Unless the economy accelerates rapidly in the next few weeks, retailers won’t have any choice. They’ll need to mark down all sorts of products to turn over their inventory.
In the retail world, that’s a terrible position to be in. It’s why Nordstrom’s stock dropped almost 20% in one day. And it’s why Macy’s stock is down about 15% in recent weeks.
But the bad news for retailers like Nordstrom and Macy’s is good news for us as shoppers…
It’s sales time!
With this holiday season fast approaching, keep a couple of things in mind…
As a shopper, don’t pay full price for anything. And as an investor, avoid retail stocks until this inventory mess gets sorted out.
Good investing,
Karina Kovalcik