Dive Brief:
- Retailers are expected to have needed inventory levels ahead of the holiday shopping season, National Retail Federation President and CEO Matthew Shay said in a Friday media briefing.
- While there was a short-lived strike at East and Gulf Coast ports by the International Longshoremen’s Association, retailers started planning in January by pulling cargo in advance and having inventory staged in warehouses and distribution centers, the CEO said.
- “I have not heard anyone, yet, suggest there will be any impact at all to the holiday season as a result of the work stoppage, that they were able to prepare in advance and move quickly in the aftermath, get things where they needed to be,” Shay said during the Port of Los Angeles’ monthly media briefing.
Dive Insight:
Retailers’ early planning efforts ahead of peak season have proven to be beneficial, according to the NRF’s CEO.
Besides the East and Gulf Coast labor strike from early October, some retailers have also been mitigating ongoing risks from disruptions in the Red Sea and tariff concerns by moving goods early.
“I think our members feel very good about their position relative to having the inventory, the merchandise they needed where they needed it,” Shay said.
Thanks to their mitigation strategies, Shay said retailers are in a good place on inventory compared to levels seen during the COVID-19 pandemic. Inventory to sales ratios are currently at 1.1, according to data from the U.S. Census Bureau, which Shay said is “back to historic ratio.”
Retail inventories are in the right place, NRF CEO says
Inventory-to-sales ratios for retail trade, excluding motor vehicle and parts dealers, not seasonally adjusted.
Executives at Walmart, Target, Macy’s and Under Armour reported they felt good about their inventory levels during their Q2 earnings calls. To reach such results, Target said it made operational changes that helped drive out-of-stock improvements. Meanwhile, Under Armour took proactive efforts to shed excess inventory and reported inventory was down 15% compared to last year, which was ahead of its expectations.
The threat of new tariffs is also leading retailers to move goods early and do as much as they can to save on costs, Shay said. In September, President Joe Biden finalized certain tariffs on goods from China for items, such as electric vehicles and batteries. Tariffs are expected to increase on goods from China, depending on results of the U.S. presidential election, something retailers are keeping an eye on, Shay added.
“And please remember, we have an early Lunar New Year coming up in 2025, second, we’re just weeks away from our presidential election if some importers anticipate new tariffs, as they did in 2019, we may see an uptick in cargo brought in early to avoid those extra costs,” Shay said.