a new round of inventory anxiety: retail complaints, sellers
The following content is fromHugo Cross Border
this summer, the U.S. retail industry is staging a promotional scuffle.
recently, according to data compiled by Bloomberg, the inventories of companies with a market value of more than $1 billion in the S & P consumer index have increased by $44.8 billion in the past two weeks, up 26% from the same period last year. Citibank's recent survey of 18 major retailers showed that in the three months ended May 22, 11 inventories grew 10 percentage points faster than sales growth, which has reached the highest level before the outbreak of the new crown.
In order to consume excess inventory, major retailers have begun to implement active price reduction strategies to reduce inventory.
Target said it plans to reduce the number of orders it orders and optimize redundant inventory by reducing prices. Retailers such as Wal-Mart and Macy's have chosen to discount slower-selling goods to make room for goods in high demand.
behind the "inventory clearance" of retailers, what trend will the consumption of major retail categories in the United States show now? What is the current situation of cross-border sellers?
01 U.S. Retailers under Stock Haze
May 17, U.S. retail chain giant Wal-Mart released its first quarter 2022 results. On the day of the financial report, Wal-Mart's share price recorded its biggest one-day decline since 1987, and its market value evaporated by $46.431 billion in one day.
financial results show that Wal-Mart's net sales reached 141.569 billion US dollars in the fiscal quarter, exceeding market expectations of 139.09 billion US dollars. But to the disappointment of investors, Wal-Mart's operating profit fell sharply by 23%, with adjusted earnings per share of only $1.3.
Chart/Wal-Mart's first quarter 2022 results, profit statement, as of April 30, 2022
Wal-Mart chief executive Doug McMillon pointed out that in addition to rising prices, Wal-Mart is also dealing with the problem of surging inventory, one of the main reasons is that consumers are turning to food and other basic goods.reported that Wal-Mart's inventory increased by 32.01% in the first quarter, 1/5 of which came from goods arriving in advance.
Chart/Wal-Mart's first quarter 2022 results, condensed balance sheet, as of April 30, 2022
on the same day, Home Depot, the US home decoration and building materials retailer, also reported its first-quarter results. According to the financial report, Home Depot's net sales in the first quarter were US $38.908 billion, compared with US $37.5 billion in the same period in 2021, an increase of 3.8% year-on-year and exceeding market expectations of US $36.647 billion. Net profit was US $4.231 billion, compared with US $5.145 billion in the same period in 2021, up 2.1% year on year.
Chart/As of May 1, 2022, Home Depot's first quarter 2022 results, income statement
on the inventory index,Home Depot is facing the same severe situation as Wal-Mart. Its inventory increased by 31.91% in May this year compared with last year.
Chart/As of May 1, 2022, Home Depot's first quarter 2022 results, condensed balance sheet
followed Wal-Mart and Home Depot, and US retail giant Target also released its first quarter 2022 financial report on May 18, causing its share price to plummet 25%, experiencing its biggest one-day decline since the Black Monday stock market crash in 1987.
reports that Target's share price has fallen by 30% since the beginning of 2022.
Target's total revenue for the quarter was $25.17 billion, up 4 percent from a year earlier, higher than market expectations of $24.47 billion, but net profit was $1.009 billion, down 51.9% from a year earlier; earnings per share were $2.17, well below market expectations of $3.07, compared with $4.2 in the same period last year.
Chart/Target's first quarter 2022 results, profit statement, as of April 30, 2022
Target said that because demand for outdoor furniture, small appliances and some electronic products fell faster than expected, and supply chain interference caused the arrival time of many products to miss the ideal sales period,April increased 43.12% year-on-year.
Chart/Target's first quarter 2022 results, condensed balance sheet, as of April 30, 2022
In addition to Wal-Mart, Home Depot, and Target, large retailers such as member-based supermarket chain market openers, department store chain Macy's, home appliances and electronics retail Best Buy were all subject to varying degrees of inventory pressure in the first quarter.
revenue and net profit both declined year-on-year, saw inventory increase by 9.39% year-on-year in the first quarter., the company's chief financial officer said that the decline in revenue was mainly due to weak sales of products such as computers and home theaters, and the decline in profits was mainly due to lower product profits and higher supply chain costs.
Bob Nelson, senior vice president of the company's finance department, explained that the company decided to replenish inventory in order to prevent the deterioration of the supply chain due to the sudden increase in consumer demand in 2021, which led to the occurrence of high inventory.
outperformed expectations, could not escape the curse of high inventories: inventories rose 17.16% year-on-year compared to the same period in 2021., said, "due to the relaxation of supply chain restrictions, goods were received from overseas earlier than expected. At the same time, shoppers have changed their buying patterns and reduced their consumption of household goods while buying socially suitable clothing and other goods."
the following figure shows two key data on inventory and sales of U.S. retail giants in the first quarter of 2022,it is not difficult to see that the U.S. retail industry is in an awkward situation of misalignment between supply and demand.
02 "sequelae" of large-scale replenishment"
this year, U.S. imports to Asia have shrunk due to the control of the Chinese epidemic, and based on this reality, U.S. retailers with low inventories at the time panicked to cover their positions. However, with the slowdown in recovery demand, retailers are no longer useful for previous consumer behavior analysis.
superimposed on the chain reaction brought about by inflation in the United States at this stage, the retail industry has also entered an "ice age".
the latest data from the US Bureau of Labor Statistics (BLS) show,In May of this year, the US CPI (Consumer Price Index) hit a 40-year high, up 8.6% year-on-year.U.S. President Biden talked about this issue at a campaign fundraising event in California, he said that the level of inflation in the United States will decline, but the people still need to coexist with inflation "for a period of time".
this means that when US inflation will begin to fall is still unknown. So what is the status quo of retail sales in the face of record-high price indices? According to the U.S. Census Bureau retail sales data, although U.S. retail sales continued to grow in March-April, real consumption was down given the impact of inflation. It can be simply understood that people spend more money, but buy less goods.
there is no doubt that retail sales have gradually weakened since this year. FRED data from the St. Louis Federal Reserve Bank show that since September 2021, retailer inventories have risen month by month, reaching an all-time high since 1992 in April this year.
's inventory-to-sales ratio (the ratio of inventory to sales, which is an indicator of whether inventory is reasonable) has also risen from a low of about 1.1 in the 2021 Christmas promotion season to a high 1.18 in March-April this year.
from the actual offline sales situation, supporting the epidemic since the U.S. import frenzy of goods, such as furniture, home, electronic appliances and other categories of sales gradually slowed down, has become the retailer's redundant inventory of the big head.
According to the latest "Monthly Pre-Sales Report on Zero Trade and Food Services in May 2022", in May,cars, auto parts, electronic appliancessales decreased significantly compared with the 4th month;Furniture, Health Care Productssales were basically the same as last month, but interrupted the growth trend since April;health care, clothing and accessories productssales did not change much, but they also declined slightly.
Chart/Excerpts from the May 2022 Monthly Pre-Sales Report on Retail Trade and Food Services released by the U.S. Census Bureau on June 15, 2022
To this end,retail giants have adopted "active" price reduction strategies to reduce inventory pressure, while ensuring high demand for product supply to improve business performance.
the week of May 9, Wal-Mart offered up to 65% discounts on "most popular" items and up to 25% discounts on technology and household goods. In the same period last year, the discount for technology products was only 10%, and the discount for household goods was only for specific products.
about the same time, mid-range department stores such as Macy's and Kohls also increased their discounts and implemented promotional activities for 57% products.
June 2, Target said it would cancel orders with suppliers if feasible or absorb excess inventory through promotional offers. Cornell, Target's chief executive, wants to clear these stocks and free up stocks for high-demand products such as food, beauty and back-to-school supplies, which are currently most in demand by consumers.
Regarding the current state of retail in the United States, the British magazine The Economist believes that although the profitability of companies is different, these companies are sending similar signals: rising operating costs and consumption will shift more to essential consumer goods. Spending.
03 The fading enthusiasm
Not only are the retail giants busy clearing their inventories and "saving themselves", but the current life of major e-commerce platforms is not very easy.
June 2, the U.S. flash auction e-commerce platform Tophatter announced that the platform will be officially closed to Chinese sellers, products in the accounts of Chinese sellers that have already settled in will stop being displayed, and products that have been or have been put on shelves will no longer receive orders.
on the reasons why they withdrew from the Chinese market at this time, Tophatter officials explained to the media in the industry: 1. the economic situation in the United States is not optimistic; 2. the Internet capital circle in the United States is cold, and enterprises seek to shrink the overseas front; 3. the cost of online advertising customers remains high.
Tophatter said that the platform will further optimize costs and return to the US domestic market, focusing only on local high-quality brand merchants.
even niche platforms like Tophatter are struggling with the "e-commerce headwind period". In the face of high costs, e-commerce giant Amazon has to make a "compromise".
According to Amazon's first-quarter financial report, the excess space will bring an additional cost of 10 billion US dollars in the first half of 2022.
due to the serious idleness of warehouse space and equipment, Amazon plans to cut at least 10 million square feet of warehouse space to bear the bitter consequences of a significant increase in costs.
in addition to the "cut expenditure" policy within the enterprise, the platform does not forget to seek a shortcut to "open source" from sellers.
recently, Amazon's US station announced that due to the rising costs of distribution, transportation, storage and buyer services in North America, the US station will rise from June 30.logisticsThe fee for remote distribution.
Chinese cross-border e-commerce sellers who take on platform costs in disguise will face greater operational pressure.
, Hugo found that, unlike in the past, the enthusiasm of cross-border sellers for participating in the annual Amazon Prime Day promotion gradually faded this year.
in the communication with many sellers and service providers, Hugo cross-border get more is"is cautiously optimistic about this year's Prime Day and will lower expectations"feedback.
On the whole,sellers have adopted more appropriate strategic contraction in their operations in order to smoothly transition to the peak sales season in the second half of the year.
's recent survey of nearly 200 sellers by Hugo Cross-Border also supports this conclusion. The data show that,Compared with 2021, 55% sellers Prime Day stock has decreased this year.
Figure/Changes in Seller's Prime Day Stock Quantity in 2022, Hugo Cross-border Mapping
is also consistent with the high inventories of major retailers in the United States,in the first five months of this year, the unsalable inventory of 26% sellers accounted for more than 31% of the total sales, and the inventory turnover period of 38% sellers reached more than 2 months.
Chart/Proportion of unsold inventory of sellers from January to May 2022, Hugo Cross-border Mapping
feedback to online GMV, nearly 60% of sellers said revenue declined to varying degrees.
affected by the sluggish performance of sellers, since the first quarter, the shipments of major cross-border logistics companies have been drastically reduced, and even the lowest value in a few years. Hugo Cross-border learned from a head logistics enterprise that its accumulated international income from January to April dropped by more than 1/3, a year-on-year decrease of 1.7 billion yuan. The income of the three major international logistics businesses all dropped by more than 50%, which is evident in the miserable performance.
such a situation. At a time of rising inflation, even retail giants are "diving" to sell inventory. How dare platform sellers with decreasing order volume and flow dare to make big preparations and try to win local retailers through "price war.
in any case, it is difficult for cross-border sellers to deliver an excellent answer to their business performance this summer promotion season in the United States due to the poor macroeconomic environment, the promotion pressure from external retailers and the implicitly elevated operating costs of the platform.
