Logistics problems, supply disruptions, risk of shortages: the consequences of the covid pandemic continue to affect the global economy. Spare parts, semiconductors or everyday products made in Asia are still struggling to reach Western countries. Yet some large international groups are currently crumbling out of stock.
Thus, the clothing specialist Gap and the retail giant Walmart are affected. The US supermarket chain Target even expects these unsold to weigh on its next financial results. A surge in stocks is usually seen as a harbinger of a recession or at least an economic slowdown. The current episode is also a result of particular factors at the time.
Large distribution groups end up with large quantities of products on their arms, which their customers no longer want or can no longer buy. Last Tuesday, Target revealed that its stocks were 43% higher than a year earlier. The growth is similar to its competitors Walmart (+ 32%) and Costco (+ 26%). Quite surprisingly, as Chinese manufacturing output remains far from pre-covid and cargoes are piling up off U.S. ports for lack of arms to unload them. Truck drivers are also missing to ship these goods to their buyers.
A recent analysis:
Explanation: These consumer groups were larger than normal reserves. They have accumulated as many products as possible, often abroad, precisely in order to reduce the risk of shortages.
But their customers have changed their habits. Inflation, which has reached unprecedented levels for decades on both sides of the Atlantic, is eroding their purchasing power. In the face of soaring gasoline and many other things, consumers are abandoning products that are so coveted during the pandemic, such as electronics or welfare. And refer to more basic and less expensive items.
Remedy for inflation?
As a result, U.S. supermarket chains will have to multiply their rebates to get rid of their bulky (and costly) surpluses. Which will lead to results: Target lowered its operating profit forecast for the quarter by 2% on Tuesday, according to Bloomberg. On the New York Stock Exchange, its stock has fallen nearly 8% since the announcement, bringing its stock to 35% since the beginning of the year. Nevertheless, Target has maintained its revenue targets for the year.
Will this wave of broken prices calm inflation at a gallop? Probably not, because only a large part of the products available in large stores are affected, those of so-called “discretionary” consumption – that is, non-essential, as opposed to basic necessities. Above all, other important items of expenditure remain on the rise: fuels, especially food.
#companies #crumbling #stocks