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Home » U.S. Retailers Plan Big Discounts as Inflation, Inventory Add Up

U.S. Retailers Plan Big Discounts as Inflation, Inventory Add Up

Target shopping bags
A shopper carries Target Corp. shopping bags. Photo: Bloomberg.
June 16, 2022
Bloomberg

A nationwide inventory glut has led to unexpected bargains for U.S. shoppers, especially for goods that used to be hot sellers during the pandemic.

The discounts stand out as Americans grapple with a 40-year high in inflation, which has raised prices from the gas pump to the grocery store. The likes of Walmart Inc., Target Corp. and Gap Inc. have slashed prices on non-essential items they stocked up on but shoppers are no longer clamoring for. Lower demand for big-ticket items contributed to U.S. retail sales posting their first drop in five months on Wednesday.

Read more: Walmart, Gap and Others Amass $45 Billion in Extra Stuff

That means deals on furniture, televisions, home goods and some clothing. Walmart and Gap’s Old Navy are also trying to keep prices low on certain basic items so they don’t alienate shoppers with limited budgets.

“If we think about the most value-conscious customer group, we’re watching that group,” Walmart Chief Executive Officer Doug McMillon told analysts in early June. “How is that group behaving and what do they need from us?”

Here are some places where consumers are likely to get a good deal this summer:

Food Staples

Wary of losing foot traffic, Walmart is curbing increases in “opening price points” for some basic goods. That means bargains are likely in products such as canned tuna, macaroni and cheese, rice, bread, beans and pasta. This comes even as the company raises prices more aggressively on other items.

Some Clothes

Macy’s Inc. also hinted at potential discounts. Like many retailers, the company has more casual and leisurewear than consumers want as they return to the office. This will likely lead to markdowns, executives told analysts in May.

At Walmart, a 32% jump in inventories during the first quarter prompted the retailer to mark down items such as apparel. Meanwhile, Gap committed to freezing prices for certain kids fashion essentials at Old Navy through the back-to-school shopping season.

Electronics and Appliances

Target’s inventory pileup forced it to cut prices on a host of bulky items — including televisions — to make room for more in-demand products like beauty and personal care. In mid-June, the retailer’s website showed discounts on patio furniture and kitchen appliances such as air fryers, toasters and blenders.

In an interview earlier this month, Target Chief Financial Officer Michael Fiddelke signaled that the deals would continue as the company seeks to offload inventory and free up space in stores and warehouses.

Best Buy Co. has also ramped up promotions on electronic goods like computers and televisions.

Furniture and Bedding

Furniture, including bedding, was one of the few categories to post a monthly price decline in May, according to the U.S. Department of Labor.

Macy’s said consumers have pulled back from buying textiles, table linens and housewares that were popular during the “nesting” phase of the pandemic, and they’re balking at the possibility of paying higher prices for those items now. The company also said it’s being “very careful” about pricing for items such as entry-level couches and mattresses to not scare away buyers.

Slumping sales at HomeGoods stores last quarter marred an otherwise upbeat earnings report from parent TJX Cos., which plans to emphasize “value messaging” in future marketing for the brand.

Online seller Overstock.com Inc. hopes to take advantage of the inventory glut plaguing brick-and-mortar retailers. The company is “well suited to be the best house on the bad block in either a period of an all-out recession, or just slowing interest in the home category,” said Tom Forte, an analyst at D.A. Davidson.

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