Retailers wrestle with mountain of unsold stock

Retailers wrestle with mountain of unsold stock
Adidas announced a first quarter profit plunge of 93 percent amid a huge decline in demand for the clothing sector. (AFP)
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Updated 03 June 2020

Retailers wrestle with mountain of unsold stock

Retailers wrestle with mountain of unsold stock
  • Many stores are likely to pursue a combination of holding sales as well selling stock to off-price retailers

MADRID: Forget fast or slow fashion, now it’s ground to a halt.

A mountain of apparel stock has been piling up in stores, distribution centers, warehouses and even shipping containers during months of COVID-19 lockdowns. As retailers reopen around the world, they have to work out how to get rid of it.

Their main options? Keep it in storage, hold a sale, offload it to “off-price” retailers like TJ Maxx which sell branded goods at deep discounts, or move it to online resale sites.

None are ideal, and all are damage-limitation.

Real estate company Knight Frank told Reuters it had fielded inquiries for excess stock for over 6 million square feet(557,500 square meters) of short-term let warehouse space in Britain since the pandemic took hold there in March.

Yet storage is only a realistic option for evergreen “basics” that are not tied to one particular year and could be sold at a later date should consumer demand bounce back — items like underwear, t-shirts, chinos and classic sneakers.

Apparel chains including British high-street retailer Next and German sportswear brand Adidas said they had stashed away unsold basics, with the aim to offer them to shoppers next year instead.

But stowing away piles of inventory is risky.

“This is not like wine that gets better with age. Your inventory gets worse,” said Emanuel Chirico, chief executive of PVH Corp, which owns Calvin Klein and Tommy Hilfiger, on a recent earnings call.

In the US, clothing sales fell 89 percent in April from the same month in 2019, while in the UK clothing sales sank by 50 percent compared with a squeezed March.

Retailers hope that easing of lockdown measures will see shoppers return to stores, eager to unleash pent-up demand. But there is no guarantee that sales will rebound any time soon.

Many stores are likely to pursue a combination of holding sales as well selling stock to off-price retailers. The mix will depend on consumer appetite, how much stock stores have to shift and how fast they must free up space for new collections.

In-store discounts are usually a better option as dumping inventory in bulk to off-price players returns just pennies on the dollar for the retailers.

Off-price retail group TJX, which started opening its TJ Maxx and Marshalls stores this month, said in May there was “incredible availability” of stock on the market.