Walmart has an inventory problem as a result of an impending economic downturn and its impact on consumer spending.
According to Forbes, executives outlined the issues the company is facing, including $1.5 billion in unwanted inventory.
“If we could just wave a magic wand, we’d make it go away today,” said chief financial officer John David Rainey. “We’ve also cancelled billions of dollars in orders to help align inventory levels with expected demand.”
Executives believe it may take a couple of quarters to clear the additional inventory, much of which falls in the sporting goods, electronics, home, and apparel categories. In addition, changing buying habits as a result of the economy are also making it difficult to predict how customers will spend their money.
“We’ve seen more pronounced consumer shifts and trade-down activity” Rainey explained. “As an example, instead of deli meats at higher price points, customers are increasing purchases of hotdogs as well as canned tuna or chicken.”
Rainey indicates the company is struggling with a far sharper return to pre-pandemic norms than many companies expected, as well as a massive increase in inflation.
“As a backdrop, the shifts that we’ve seen in consumer behavior through the pandemic, shifting from in-store to online, along with big swings in the purchase of goods versus services. and then the reversion back to pre-pandemic norms has been sharp and difficult to predict. These trends have been exacerbated by inflationary pressure on the consumer that many of us have not experienced in our lifetime, the effect of which has recently changed consumption patterns in certain categories for us, notably general merchandise.”
Overall, Walmart’s situation should serve as a further warning regarding the state of the economy.