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Walmart cancels orders worth billions as it battles overstock
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By Nithya Bose in US business news, posted August 21, 2022
Walmart announced it has canceled "billions of dollars of orders" from suppliers to control the inventory load in its stores.
The company said the canceled orders are meant to "help align inventory levels with expected demand," as the retail giant has been wrestling with an excess of overstock throughout the year.
Analysts and store managers have commented on it as an unprecedented move by the retailer.
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Speaking about the move to Insider, GlobalData Retail MD Neil Saunders said he has never seen Walmart call off orders on such a large scale.
He said: "The cancellations are extensive and reflect both how much consumer demand has changed and how much of a glut of product Walmart currently has and needs to work through."
"It is also likely that some of these orders were placed at a time when the economy was in a much better state and Walmart was assuming elevated sales levels would continue.”
"Obviously that has not materialized so action had to be taken to correct the imbalance."
Due to inflation and supply chain concerns, Walmart has been dealing with a multitude of overstock in general product categories for months.
Its store-level employees have previously outlined many challenges in the backroom owing to overstock.
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Problems included several pallets making the floors impassable, towering boxes that obstructed access to areas such as private breastfeeding rooms and restrooms, and outdoor trailers were loaded with overstock.
Walmart CFO John David Rainey stated during a quarterly earnings call on Tuesday, August 16 that the business "made a lot of progress" with excess inventory through markdowns last quarter.
He stated the general merchandise inventory growth rates have dropped by more than 15 percent since the first quarter.
Nonetheless, Rainey stated that the company had "more work to do," citing overstock in apparel, home products, and electronics.
Walmart did not immediately respond to requests for comment on its decision to cancel vendor orders.
Walmart isn't the only retailer that has recently scrapped supplier orders.
Target took the same step in June, much to the ire of several analysts.
Source: Insider
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