Home Top Stories Stores have too much inventory. That's good news for holiday shoppers.

Stores have too much inventory. That’s good news for holiday shoppers.

The holiday shopping season is in full effect as Thanksgiving week begins, and retailers are nervous.

Multiple big-box stores continue to struggle with an inventory overhang stemming from the pandemic boom, leading some to forecast their uncertainty, even as they create opportunities to entice consumers.

Data from the research group Factset show inventory levels among retailers including Walmart, Target, Amazon and Best Buy remain significantly above pre-pandemic levels. It’s a consequence of the end to the stay-at-home buying frenzy that snarled supply chains worldwide.

Now, to manage and clear the glut, the companies are leaning into special promotions, especially for products such as electronics, home goods and some apparel.

But those sales events are also coming at a time of a slowing economy and the ongoing weight of inflation, retail executives say. That has led some companies to exercise caution in their forecasts for the most consequential shopping season of the year.

“While we anticipated a highly promotional environment this fall, given the excess inventory we’ve been seeing across retail, this enhanced focus on promotions reflects an increasing level of stress on consumers as they navigate through multiple headwinds, including persistent inflation and rapidly rising interest rates,” Target’s chief financial officer Michael Fiddelke said during the Minneapolis-based company’s fiscal third quarter earnings call last week.

Target shares fell about 17% after it reported its earnings, leading the entire stock market to trend lower.

Despite the mixed economic signals, the U.S. Census Bureau reported unexpectedly strong retail sales for October. Some of that may have been caused by deal events like Amazon’s “Prime Day” promotion. It was previously a once-per-year sale before the e-commerce giant rolled out a second round of deals in October.

“We’re realistic that there’s various factors weighing on people’s wallets, and we’re not quite sure how strong holiday spending will be versus last year,” Amazon Chief Financial Officer Brian Olsavsky told analysts on the company’s earnings call Oct. 27. “And we’re ready for a variety of outcomes. But we know the consumers when they’re looking for good deals.”

The National Retail Federation said earlier this month that it expects annual holiday sales growth to hit between 6% and 8%. That would represent a decline from the unprecedented 13.5% growth seen in 2021 and the 9.3% growth seen in 2020, but still well above historic averages.

“The holiday shopping season kicked off earlier this year — a growing trend in recent years — as shoppers are concerned about inflation and availability of products,” its chief economist, Jack Kleinhenz, said in a statement. “Retailers are responding to that demand, as we saw several major scheduled buying events in October. While this may result in some sales being pulled forward, we expect to see continued deals and promotions throughout the remaining months.”

Data from the financial services group Mastercard said it is showing 7% growth year on year for the holiday season. Steve Sadove, Mastercard senior adviser and the former CEO of the luxury department store Saks, said the forecast reflects both upward inflationary pressures and the downward force caused by increased promotions at stores.

“Inflation is an important part of story, he said. But with the high inventory level, that excess dampens inflation because of the discounted prices.”

Some companies that are forecasting lower holiday revenues may be doing so as an earnings strategy, betting that sales could deliver higher than expected returns, according to Archie Black, the CEO of SPS Commerce, a supply chain management company.

“If it comes in weak, no harm no foul,” he said. “If it comes in strong, you’re a hero. They are managing expectations.”

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