Walmart’s inventory glut is declining | Supply chain dive

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diving letter:

  • Walmart reduced about a third of its excess US inventory from Q2 to Q3 as the retail giant takes a more cautious approach to ordering activity, executives said on the company’s quarterly earnings call on Tuesday.
  • Walmart US saw inventory rise 12.4% year over year, about 70% of which was tied to inflation. That’s an improvement from the 25.6% inventory growth that Walmart US had in the second quarter, 40% of which was tied to inflation.
  • John Furner, President and CEO of Walmart US, said he still has $1 billion in excess inventory in his possession. “We said at the beginning of the first quarter that we would need a couple of quarters to work through the inventory and we continue to do so.”

Dive insight:

Walmart overstocked relative to demand in some broad merchandise categories this year, a reversal of the past two years of looking to introduce more products — even with chartered ships. Inflation-weary consumers have scaled back discretionary spending this year, leading to slower sales in categories like electronics, household and apparel.

The retailer has been attacking this deluge throughout the year as most of the additional inventory in Q1 made its way from the company’s supply chain to store shelves in Q3. It has already canceled billions of dollars in orders, increased its discounts and made targeted category reductions. Other retailers have taken similar action.

Walmart’s retailers have also helped by taking “an item-by-item, category-by-category approach” to shopping to match inventory with demand, said Walmart President and CEO Doug McMillon . Retailer item quantity decisions are especially important in an uncertain economic environment.

“We can be more aggressive on shorter lead time items like groceries and consumables, but on longer lead time imported items we are particularly sensitive to volume decisions,” said McMillon.

Walmart expects further improvements in its inventory levels through the year-end, even after adjusting for inflation.

“I was at an import center last week, and the inbound is in really good shape,” Furner said. “The orders are in line.”

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