Retail titans have recently reported mixed earnings results from this past week and supply chain issues and rising inflation rates continue to hinder their operations.
Food services and retail sales reported from the month of July remained essentially unchanged from the reports from June, as seen in a Wednesday report made public by the Census Bureau, seemingly reflecting a Consumer Price Index (CPI) that stayed essentially flat over the same period of time. Sitting at a rate of 8.5% — which is an almost 40-year high –, year over year inflation has many retailers witnessing disruptions in the normal consumer behavior and adjusting the way they conduct business in response.
As an example, Target has reported a roughly 90% drop in its quarterly profits from where it sat last year, which took place as the company announced its choice to mark down unwanted inventory ahead of the holiday season.
“If we hadn’t dealt with our excess inventory head on, we could have avoided some short-term pain on the profit line, but that would have hampered our longer-term potential,” expressed Michael Fiddelke, the CFO of Target, to reporters, as stated by CNBC. “While our quarterly profit took a meaningful step down, our future path is brighter.”
Additionally, as stated by Target CEO Brian Cornell, the company has started to prioritize household items, food, and other inventory with a much higher turnover rate — even going so far as to cancel $1.5 billion in orders for various goods that have much lower demand.
All the while, home improvement retailer Home Depot highlighted a 6.5% increase in its profits for the second quarter of the 2021 fiscal year.
“Our performance reflects continued strength in demand for home improvement projects,” expressed Ted Decker, the CEO of Home Deport, in a release. “Our team has done a fantastic job serving our customers, while continuing to navigate a challenging and dynamic environment.”
In the same vein, Walmart saw sales numbers that went far past the expectations of the analysts even as the rate of inflation ate away at the profit margins. In an interview with Courtney Reagan of CNBC, Walmart CEO Doug McMillion spoke about how Walmart is growing its consumer base by being more enticing to wealthier families that are now having a hard time dealing with the higher prices at other retailers.
“It’s a conflicting period in terms of the data. If you look at what’s happening across categories and across income levels, inflation is having an impact particularly for those who don’t have as much money,” stated McMillion. “So we see them behaving in different ways. … Higher income families are shopping at Walmart because they’re so price sensitive right now. We shared earlier this morning that families making more than $100,000 in household income have driven a lot of our growth during this last quarter.”
McMillon, whose company sports about 1.6 million domestic employees and remains the largest private employer in the country, stated that wage inflation will endure indefinitely.
“We’ve raised our wages, which we’re happy to do … that creates a new level of which pricing has to be adjusted to reflect,” he claimed. “So I think there’s some level of inflation that’s going to be with us basically forever. Hopefully we’ll see food inflation in particular improve as we go through next year.”
