Walmart is planning to reduce prices to try to sell off a massive surplus of goods.
The retail giant stated in its results announcement for the June quarter that increasing food and gasoline prices are limiting shoppers’ capacity to purchase other items like clothes.
There are now more of these supplies than the company can sell so it is offering discounts on them.
CEO Doug McMillon said: “The increasing levels of food and fuel inflation are affecting how customers spend,” in a news release Monday.
“Apparel in Walmart U.S. is requiring more markdown dollars.”
The inventory stockpile is the outcome of companies attempting to meet pandemic demand while dealing with supply chain constraints.
While they were confined to their homes, customers sought to purchase things that matched their lockdown requirements, such as casual clothing, home office supplies, and workout equipment.
However, as the economy has improved and supply chains have recovered, retailers have found themselves with surplus inventory.
Target issued a similar warning to Walmart last month, stating that people were changing spending away from things that were popular during the early days of the outbreak, such as appliances and furnishings, and toward stuff such as luggage and cosmetics.
Neil Saunders, MD of GlobalData, a data analytics and consulting group said: “There are pricing problems in apparel, home furnishings, furniture and, to a certain extent, electronics,”.
“Those three areas going to be the ones where you’ll see the most discounting.”
Saunders said apparel is particularly vulnerable to discounting because it is seasonal.
He said: “So if you’ve got summer stock, you don’t really want to be left with it going into fall and winter.”
“So that’s where there are going to be really good bargains.”
Saunders added that while supply chains have begun to stabilize, port and manufacturing closures owing to increases in Covid cases throughout the world continue to impact delivery schedules.
He said: “Most retailers now understand having to discount to stimulate demand, because the consumer is under financial pressure.”
“So if the consumer looks hard enough, they will find bargains.”
Source: NBC News