There’s some positive news for shoppers looking for value: more discounts are on the horizon.
Grappling with excess inventories in Q1, retailers this earnings season have said they are looking for new ways to keep items flowing, including discounts and promotions. As such, executives from Walmart, Target, Foot Locker, Macy’s and more said that they expect to see an increase in promotional activity in upcoming quarters, a shift from recent trends.
The surge in discounting comes as inflation soars at record-high levels. Consumer prices rose by 8.3% in April compared to a year ago, according to the Bureau of Labor Statistics’ monthly report. Specifically, the food index rose 9.4%, marking the largest 12-month increase since the period ending April 1981. Some retailers said sales in Q1 were impacted by a general consumer shift away from from discretionary to non-discretionary categories such as groceries.
With commodities like food and gas up so high, Walmart said consumers were spending less in general merchandise categories like apparel, which contributed to higher levels of inventory than desired. The retailer said it plans to roll back prices on certain items, like apparel, to keep inventory flowing and help it win over consumers that have generally become accustomed to higher prices across multiple categories.
Target is also grappling with excess inventory due to a change in its mix, which resulted in less sales across home, electronics, sporting goods and apparel. The company also pursed markdowns on items to help it clear out inventory.
Macy’s, which also experienced higher-than-usual inventory levels in Q1 as consumers shifted away from pandemic categories, said it would undergo markdowns to lesson inventory levels in overstock categories. The department store retailer’s CFO Adrian Mitchell said he expects to see “an elevated promotional environment given the high inventory levels we see in the industry.”
Genesco, the footwear firm behind Journeys, Johnston & Murphy and Schuh, said promotions could help it win over repeat consumers that are seeing a hit to their wallets from higher than usual gas and food prices.
“In light of the current economic environment and its potential impact on consumer demand, we also believe it is prudent to assume the environment is likely to be more promotional than originally expected,” said Genesco CFO Thomas George. “Therefore, as we think about the remainder of the year, we have incorporated the impact of the stronger dollar, elevated cost and a more promotional environment into our outlook.”
Foot Locker CEO Dick Johnson said he expects to see promotions to come back this year compared to the few markdowns seen throughout 2021.
According to NPD’s retail tracking data, promotional activity is starting to pick up across the footwear market, especially in the fashion category.
Given the inflationary environment, discount retailers like TJX Companies have been in a strong position to gain from value-driven consumers. At the same time, resale platforms continue to gain momentum as well.
The U.S. secondhand market is expected to more than double by 2026, hitting $82 billion, according to a recent report from ThredUp and GlobalData. Overall, resale is expected to grow 16x faster than the retail clothing sector in the U.S. by 2026.