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Walmart is slashing prices to get rid of excess inventory

The retail giant finds itself in a similar position to its closest rival, Target, which in May cited an overstock of merchandise it needed to discount.
Image: Customers enter a Walmart store in Torrance, Calif. on May 15, 2022.
Customers enter a Walmart store in Torrance, Calif., on May 15.Bing Guan / Bloomberg via Getty Images

Retail giant Walmart told investors Monday it is looking to slash prices on items like apparel as it faces an overstock of some goods.

In a statement posted on its website, Walmart mentioned that the higher prices consumers are paying for food and gasoline are cutting into their ability to buy other items, like clothing. The upshot: There are now more of these goods than the company can sell — so it is discounting the prices on them.

“The increasing levels of food and fuel inflation are affecting how customers spend,” CEO Doug McMillon said in a news release Monday. “Apparel in Walmart U.S. is requiring more markdown dollars.”

The goods build-up is the result of companies’ trying to keep pace with pandemic demand while coping with supply chain bottlenecks. While they were stuck at home, consumers looked to purchase items that met their lockdown needs, like casual clothes, goods for home offices and exercise equipment.

But as the economy has reopened and as supply chains have recovered somewhat, retailers have found themselves left with excess merchandise.

Last month, Target issued a warning similar to Walmart's, saying consumers were shifting spending away from items that proved popular during the early days of the pandemic, like appliances and furniture, to merchandise like luggage and cosmetics.

"There are [pricing] problems in apparel, home furnishings, furniture and, to a certain extent, electronics," said Neil Saunders, the managing director of GlobalData, a data analytics and consulting group. "Those three areas going to be the ones where you'll see the most discounting."

Saunders said apparel is particularly vulnerable to discounting because it is seasonal.

"So if you’ve got summer stock, you don’t really want to be left with it going into fall and winter," he said. "So that’s where there are going to be really good bargains."

Saunders added that while supply chains have begun to normalize, port and factory closings due to spikes in Covid cases around the world continue to affect shipping times. His advice to holiday shoppers: Order early — and look for deals.

"Most retailers now understand having to discount to stimulate demand, because the consumer is under financial pressure," he said. "So if the consumer looks hard enough, they will find bargains."

CORRECTION (July 28, 2022, 11:23 a.m. ET): A previous version of this article attributed Walmart's announcement to an earnings release. The announcement was made in a press statement on its website.