Don't expect stocked clearance sections as the economy reopens
Shoppers who are upset about the rising prices of goods won't find much solace in discount bins and sale racks.
Driving the news: Shortages have plagued almost every industry, with surging demand outpacing supply as the economy reopens.
Why it matters: Retailers facing tight inventories are having a tough time keeping shelves stocked with new stuff. But this means there’s less stuff that’ll get marked down and moved to clearance sections.
- The temporary tight inventories are boosting corporate earnings growth and may also be skewing inflation figures.
By the numbers: According to the Census' business inventories report released on Friday, retailers' inventory levels were essentially unchanged from a year ago
- During that same period, sales jumped 23.5%.
- The inventories to sales ratio fell to 1.09 from 1.34 in the prior year, which means inventories are a lot tighter.
- This ratio was lower for most categories including cars, furniture and clothing.
What they’re saying: "When COVID hit, everyone was trying to get their inventories in line,” Pivotal Research senior analyst Mitch Kummetz tells Axios.
- “Pretty quickly we got into a situation where demand was outstripping supply.”
- “The fact that they are selling things at full price without having to discount — that's driving a lot of these big earnings that we've been seeing."
- But it’s also among the reasons to believe the current elevated levels of inflation could prove transitory.
- “The process is about failing to cut prices (or cutting prices less than normal),” Donovan wrote. “It is not a signal of longer-term pricing power.”
What to watch: Retailers will announce quarterly earnings in August, and they’ll reveal to investors and analysts what’s going on with pricing and inventories.
Go deeper: The pandemic-induced renaissance of malls