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"Walmart And Other Retailers Canceling Billions
Of Dollars In Orders As Fears Of A Dark Winter Rising"
by Epic Economist
"Something really strange is happening in the U.S. retail sector. Walmart, Target, and other major retailers are literally canceling billions of dollars in orders right ahead of the busiest shopping season. Do they know something they aren’t telling us? We’ve never seen such a large-scale order cancellation happening before. Under normal conditions, this wouldn’t make any sense. The holiday season is typically the time when retailers record the highest sales volume in the entire year, and this time in 2021, everyone in the industry was extremely worried about whether there would be enough inventory to meet consumer demand due to global supply chain disruptions. But it seems that things have been turned upside down, and all of a sudden, big retail chains are cutting back and calling off a massive number of orders – and this would only make sense if they could tell that a severe economic downturn was imminent.
Earlier this month, Walmart’s EVP and CFO, John David Rainey, revealed that the company had cleared most of its summer inventory, and now it was reducing exposure in electronics, home, and sporting goods, and canceling billions of dollars in orders to realign inventories. That seems like an extremely odd decision for Walmart to take considering that, not long ago, shoppers were flooding social media with images of bare shelves and thousands of complaints about product shortages at several Walmart stores from all over the nation. Canceling billions of dollars in orders means that we will be seeing many more inventory holes in the coming months.
This week, Target also announced that it was chopping a massive amount of orders in preparation for the months ahead. In a note, Target said it had reduced its “inventory exposure in discretionary categories” by canceling more than $1.5 billion of orders in these categories and marking down products. The chain is much smaller than Walmart, which means that cutting so many orders all at once is a really big deal.
A few days ago, we just learned that Kohl’s and Under Armour have also followed the same move. In a nutshell, all of these retailers are getting really scared about the prospect of being stuck with massive amounts of inventory they cannot sell. They can already see that sales are dropping and economic conditions continue to worsen for consumers, which consequently indicates that economic activity is likely to get much lower than originally anticipated over the next few months.
One corporate executive that recently came forward and publicly admitted that he sees a deep economic downturn on the horizon is FedEx CEO Raj Subramaniam. During an interview with CNBC, the CEO actually said he believes we’re “going into a worldwide recession,” and that every sector of the industry is already feeling the early effects of it. The chief executive also highlighted that weakening global shipment volumes drove FedEx’s disappointing results. “We’re seeing that volume decline in every segment around the world, he exposed. “The weekly numbers are not looking so good, so we just assume at this point that the economic conditions are not really good. We are a reflection of everybody else’s business, especially the high-value economy in the world,” he emphasized.
Sadly, that’s the reality many businesses are facing right now. But none of this should come as a surprise. For months, economic numbers have been telling us that big trouble was on the way, and now it’s here for everyone to see it. We must remember that we are already in the midst of a raging economic crisis, and every piece of evidence is telling us that this is just the beginning of something even bigger."
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