Dive Brief:
- Walmart trimmed about one-third of its excess U.S. inventory from Q2 to Q3 as the retail giant takes a more careful approach to order activity, executives said on the company's quarterly earnings call Tuesday.
- Walmart U.S. saw a 12.4% YoY increase in inventory, about 70% of which was tied to inflation. That's an improvement from the 25.6% growth in inventory Walmart U.S. had in Q2, 40% of which was tied to inflation.
- John Furner, president and CEO of Walmart U.S., said there is still $1 billion of excess inventory in its possession. "We said at the beginning of Q1, we needed a couple of quarters to work through the inventory, and we continue to do that."
Dive Insight:
Walmart has had too much inventory relative to demand in some general merchandise categories this year, a reversal of the past two years of scrambling to bring in more products — even by chartered ship. Inflation-weary consumers have been pulling back on discretionary spending this year, leading to slower sales in categories like electronics, home and apparel.
The retailer has attacked this glut throughout the year as the majority of extra inventory made its way from the company's supply chain in Q1 to store shelves in Q3. It has already canceled billions of dollars in orders, increased its markdown levels and made targeted category reductions. Other retailers have taken similar measures.
Walmart’s merchants have also helped by taking "an item-by-item, category-by-category approach" in buying to balance inventory with demand, Walmart President and CEO Doug McMillon said. Merchant decisions around item quantity are particularly important in an uncertain economic environment.
"We can be more aggressive on shorter lead time items like food and consumables, but we're especially sensitive to quantity decisions on longer-lead time items that are imported," McMillon said.
Walmart expects further improvements in its inventory levels by year's end, even when factoring in inflation.
"I was in an import center last week, and the inbound is in really good shape," Furner said. “The orders are in line.”
