Wal-Mart Stores, Inc. (NYSE:WMT) is reducing its orders with suppliers this quarter because the volume of its unsold merchandises is increasing, according to a report from Bloomberg based on an e-mail sent to a supplier by an ordering manager of the retail giant.
In the email dated September 17, the ordering manager wrote, “We are looking at reducing inventory for Q3 and Q4.” During the second quarter, Wal-Mart Stores, Inc. (NYSE:WMT) inventory growth surpassed its sales gains in the United States. Compared with its biggest competitors, the retail giant’s inventory is increasing at a faster rate.
The volume of unsold merchandise is increasing at Wal-Mart
Pool Goyal, an analyst at Bloomberg Industries, said the volume of unsold merchandise is increasing at Wal-Mart Stores, Inc. (NYSE:WMT) because consumers are spending less and the retail giant did not execute some sales events because it does not have enough employees to stock its shelves.
“Wal-Mart’s inventory is well above their goal. Most of the inventory increase was because of missed sales,” said Goyal
The retail giant recently announced that it is hiring 55,000 seasonal associates and it is promoting 70,000 workers. Wal-Mart Stores, Inc. (NYSE:WMT) said 35,000 part-time workers will become full-time employees, and another 35,000 temporary workers will be elevated to part-time status.
Wal-Mart is cutting orders in different categories
According to one of Wal-Mart Stores, Inc. (NYSE:WMT)’s suppliers, the retail giant is cutting orders in different categories including apparel and general merchandise. The supplier mentioned that he cannot remember any previous year in which the retail giant was planning orders reduction two quarters in advance.
David Tovar, spokesperson for Wal-Mart Stores, Inc. (NYSE:WMT) said that the company is not reducing its orders across the board. According to him, it is cutting back “category by category.”
“In some cases, we’re going to be taking less, in some we’re going to be taking more,” explained Tovar.
In its regulatory filings, the retail giant emphasized that its corporate goal is to grow its inventory at or less than the rate of its net sales growth. Over the past 10 years, Wal-Mart Stores, Inc. (NYSE:WMT) managed to achieve that goal only two times over the past 10 quarters.
Last month, Wal-Mart’s U.S. Division CEO, Bill Simon said the inventory of the company increased because of weaker than expected sales trends, delay in summer weather, and timing shifts of receiving its merchandises for back-to-school, and the upcoming holiday season.