The retailer's inventories in the second quarter of 2022 rose by $11bn to hit $59.9bn © Photo by Artur Widak/NurPhoto via Getty Images
The retailer's inventories in the second quarter of 2022 rose by $11bn to hit $59.9bn © Photo by Artur Widak/NurPhoto via Getty Images

Walmart wishes for 'magic wand' to wave away $1.5bn of inventory

Will Green is news editor of Supply Management
17 August 2022

Walmart has excess inventory worth $1.5bn following yo-yoing demand as a result of the pandemic and supply chain disruption.

Inventories in the second quarter of 2022 rose by $11bn to hit $59.9bn, mostly in the areas of clothing and home electronics.

Speaking during an earnings call Doug McMillon, CEO at Walmart, said about 40% of the increase was due to inflation and, taking into account company growth and less stock next year, “you really whittle that down to about $1.5bn of inventory that if we can just wave a magic wand, we’d make go away today. And the fact is we’ll sell that.”

John David Rainey, executive vice president and chief financial officer at Walmart, said the company had “made progress reducing inventory” during the second quarter.

“The shifts that we’ve seen in consumer behaviour through the pandemic, shifting from in-store to online, along with big swings in the purchase of goods versus services, and then the reversion back to pre-pandemic norms has been sharp and difficult to predict,” he said.

“These trends have been exacerbated by inflationary pressure on the consumer that many of us have not experienced in our lifetime, the effect of which has recently changed consumption patterns in certain categories for us, notably general merchandise.

“The result of all of this put pressure on our inventory levels that peaked in the last quarter.”

Rainey said the company was “managing prices to reflect certain supply chain costs and inflation and reducing storage costs associated with the backlog of shipping containers”.

“We’re encouraged by the initial steps taken by some suppliers to help us reduce product acquisition costs,” he said. 

“We’ve taken similar steps to manage our support and overhead cost, too, and we’re achieving significant savings in the procurement of goods not for resale.

“In our stores and fulfillment and distribution centers, we’ve seen labour productivity metrics improve. We’re finding efficiencies and reducing expenses while still focusing on operational excellence.”

Walmart was among firms who chartered ships to import goods in response to pandemic-related supply chain disruption that saw disarray at ports.

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