Here’s where out-of-stocks are and where retailers are over-stocked, by retailer category

It’s still supply chain chaos for retailers, but different retailers face different types of chaos.

By Wolf Richter for WOLF STREET.

Now there are stories out there about retailers who suddenly got “overstocked”, and shortages turned into oversupply, and suddenly people are already seeing that supply chains have been miraculously fixed or something. But overall inventories at retailers remain very low, and in the largest category of retailers – car dealerships – inventories are desperately low and they are low in other categories of retailers, but general merchandise retailers like Walmart and Target are suddenly swamped in some types of goods.

What happened at these general merchandise retailers, and a few others, is that the eternally long lead times, problems, and chaos delayed the goods, and when they finally got there, consumers moved on to other things. And those retailers were left without the things that consumers had moved to and were overcrowded with the things that consumers were no longer interested in.

Overall retail inventories, in terms of months’ supply, are still close to historic lows.

Having the wrong stock on hand is a classic retailer problem. To minimize this risk, retailers have shortened their supply chains and postponed major product decisions until the last moment. And then the pandemic hit, and that solution became a big problem, and retailers had to adjust quickly. And some categories of retailers have been caught off guard and are overstocked, while many other categories of retailers have very tight inventories or shortages, including the largest category of retailers – car dealerships – that are still out of stock. The overall inventory sales index – or month supply – at retailers has improved only slightly to 1.18 month supply:

Dollar inventories = furious cost inflation, not inventory build-up.

Inflation on goods – which is what retailers sell – has been much higher than the overall CPI. For example, used vehicle wholesale prices, which become the cost of inventory for dealers, increased by 35% to 45% year-over-year between October of last year and February of this year. These cost increases have increased dollar inventories, although used vehicle inventories in terms of vehicles remain tight and have declined over the past three months.

What matters: months supply.

To exclude the impact of increased cost of goods and to get an idea of ​​what the actual levels of inventory are in relation to sales, we look at the “stock-to-sales ratio”, which is a classic industry metric that shows how many months it takes to sell on-hand inventory at the end of the month at the current sales rate.

Last week, the Census Bureau released retail inventory data through April. The end of April is also when the first fiscal quarter for most retailers, including Walmart and Target, ends.

Let’s break it down by retailer category, because there are big differences.

At car dealerships, the largest category of retailers, which in normal times account for over 35% of total retail inventories, inventories remain desperately low with 1.28 months of supply, down from approximately 2.2 to 2.4 months’ supply before the pandemic. And they barely made any progress:

Car dealers are now struggling with another problem: pickup trucks and large SUVs were all the rage in 2020 and 2021 and early 2022, and no one had stock due to semiconductor shortages. Automakers have prioritized producing these vehicles because they are much more expensive and profitable than smaller vehicles, and if they can only build a limited number of vehicles due to the shortage of semiconductors, they would build the most expensive and profitable ones to maximize their revenues and profits – which they did.

Then gas prices started to rise earlier this year and suddenly consumers were chasing more fuel-efficient cars and compact SUVs and hybrids, and now dealers are out of them, almost all of them are out of stock, while pickup trucks are starting to sell out. accumulate in some brands. But overall new vehicle inventories remain desperately low.

The number of new vehicles in dealer lots, according to data from Cox Automotive, is down 70% from 2019 to just 1.13 million vehicles at the end of May. Many models, especially now more economical vehicles, have practically disappeared from stock.

The number of used vehicles in dealer lots, at 2.47 million vehicles it is tight and below pre-pandemic levels, but there is enough supply for the lowest sales rates currently, which are maintained by a partial strike by buyers against these sky-high prices:

In food and beverage stores, supply is almost back to pre-pandemic levels, at 0.78 months, which is a good thing:

In building material and garden supply storessupply is now back at the upper end of the normal pre-pandemic range, at 1.87 month, the same as in April and May 2019:

In clothing and accessories stores, the stock has been improving from last year’s desperate levels. The current 2.12 month supply is about 13% below where it was in the same period in 2019:

In general merchandise stores, which accounts for about 12% of total retail inventory and includes Walmart and Target, inventories increased sharply as their merchandise finally arrived. Meanwhile, consumers shifted their spending to services like travel, dentists and entertainment events, and to items that these stores suddenly sold out, and now there are rich levels of supply, but some of them are the wrong things, with a shortage of the right thing. The 1.58 month supply was the highest since 2007:

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