Department of Commerce data shows that retail and wholesale inventories may be getting closer to pre-pandemic levels
HIGH POINT — For months on end, inventories have been the bane of the industry as they represent a significant amount of cash tied up in warehouse facilities of both retailers and wholesalers alike.
In periods of high demand, this would be a good problem to have as the proverbial shelves would be stocked with goods for consumers looking for quick availability of what they want.
Unfortunately, the present inventory situation represents a combination of having too much product during a period of low demand and perhaps not enough of the right product for those who are in the market and may now have to wait weeks or months for what they want.
So what does the inventory situation look like? The story of course — as with holiday weekend sales — will vary from dealer to dealer with no real consistency so to speak.
However, there could be some insight in the numbers as reported by the U.S. Department of Commerce each month. Although there is some variability in the numbers based on who reports what, they typically don’t lie and thus present a more realistic and consistent picture.
According to the latest preliminary figures for the month of May, inventories at furniture and home furnishings and appliance/electronics stores were $30.8 billion, down from $31.1 billion in April and $32 billion in March. This compares to $31.9 billion in January and $32.2 billion in February.
Like furniture, most categories, including food and beverage stores, department stores and building materials and garden supplies stores, also saw their inventories fall from the start of the year, while motor vehicle and parts dealers, clothing stores and general merchandise stores have seen their inventories rise.
As the topsy-turvy inventories during the pandemic are probably not a good comparison, we looked at levels for 2019, or what most companies — namely public companies reporting quarterly and annual results — have referred to as pre-pandemic. That year, inventories at furniture and home furnishings and appliance/electronic stores ranged from a low of $27.2 billion in December 2019 to $28.8 billion in February 2019.
Another point worth noting is that much of the current inventory was purchased when container prices peaked. Thus retailers may need to take a loss to unload some of that product. It also could be B or C level merchandise that retailers purchased out of desperation during periods of supply chain disruptions when product was difficult to manufacture and flow.
Thus they will likely need to bring in new goods to freshen their floors. The good news is that this merchandise has been flowing on lower-cost containers, meaning that excessively high transportation costs won’t have to be reflected in the ticket price. That’s a timely shift given some of the losses retailers may have to take on goods purchased when containers were $20,000 and equaled or exceeded the cost of the goods on those containers.
Meanwhile, wholesale inventories this year peaked at $19.5 billion in January, falling to $19.1 billion in February, $18.8 billion in March, $18.7 billion in April and $18.64 billion in May, the latest month for which figures were available.
Compared with the retail numbers, the wholesale figures are higher than pre-pandemic levels in 2019. That year, they ranged from a low of $13.4 billion to a high of $14.2 billion in February. However they also are lower than their peak of $20.6 billion in September 2022.
Thus, the numbers at the retail and the supplier side of the business appear to be getting closer to what they were during more normal business conditions.
For some additional perspective, we refer to the recent quarterly Furnishings Digest Newsletter published by Mann, Armistead & Epperson.
“For just over a year, retailers, domestic manufacturers and importers have been bumper to bumper with finished goods sourced through the prior 18 months, often during severe shortages,” the newsletter stated. “Then, in just a few weeks, it flooded in and filled almost every available spot. It has taken massive efforts to reduce and normalize these inventories. Today we believe over half of our furniture and mattress retailers have been able to reach some equilibrium and that should extend further by calendar year end (we hope).”
Adds Smith Leonard’s latest Furniture Insights report of May inventories at manufacturers and distributors:
“Inventories were down 23% from last year and down 5% from April. The 23% decline last year compared to a 12% decline reported last month. From what we are hearing, and considering price increases, it appears that inventory levels at the manufacturers and distributors are at least somewhat in line with current business conditions.”
How are inventories at your business? Are you seeing any major changes worth noting? Feel free to email me at firstname.lastname@example.org or respond in the comments section for this article.