Warehouse capacity is still at a premium across the United States, and inventories are continuing to build up as retail chains Walmart Inc. (NYSE: WMT) and Target Corporation (NYSE: TGT) battle with consumer demand that is falling in several areas.
Walmart lowers full-year guidance
The newest retail loser is Walmart, whose news this week that it was lowering its full-year and quarterly profit guidance demonstrates the impact of inflation on consumers as well as how quickly purchasing habits can change, even for the biggest shops. The corporation claimed it had to lower prices in its outlets to get rid of surplus inventory.
That came after Target cut its second-quarter prediction last month, which it blamed on holding too much inventory and some categories, like small appliances, which saw a decline in demand.
According to Warehouse Quote’s most recent Warehouse Pricing Index, the constrained warehouse scenario is not anticipated to alter (WPI). In addition, the national vacancy rate in the United States is roughly 3%, while it is closer to 1% in port markets.
Warehouse Quote CEO Ben Hagedorn said, “It’s really incredible. We’ve also seen a 20% year-over-year rate increase for warehouse space, so we are seeing significant inflation there. We are also reporting seven consecutive quarters of positive net absorption. Warehouse capacity for imports remains to be an issue across the U.S.”
Seasonal staples and durable products remaining in warehouses
As per Hagedorn, seasonal staples and durable products such as appliances are being kept in warehouses. The “just in case” mindset is replacing the “just in time” approach among businesses, according to Hagedorn, who also noted that inventory-to-sales proportions continue to increase across sectors.
Other significant merchants that have reported having large inventory levels have stated that they are at ease with the accumulations and won’t be subject to price reductions. Dick’s Sporting Goods stated levels of inventory as of April 30 were up 40.4% from a year ago in late May. However, the company added that it was “closely regulating inventory levels” to avoid having surplus inventory and deep discounts.