Battered by Black Swans, Retail Industry Hunkers Down

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The week of the Fourth of July holiday is one of those moments in the year when the rhythm of nature, our lives, and our businesses slows and briefly pauses, giving us a chance to catch our breath and reflect on where we’ve been and where we’re going.

In the retail industry, where we’ve been is through a gauntlet of what are referred to on Wall Street as black swan events. 

These are developments of enormous consequence, positive or negative, that can't be predicted or calculated for, such as pandemics and wars. (The term refers to the discovery in Australia in 1697 of swans that were black, upending the scientific dogma of the time — that swans could only be white.)

Near the end of last year, about four months before companies like Target and Walmart revealed staggering inventory gluts, those of us with long memories in the retail industry could sense that air was leaking from the bubble of hype and hope that had sent the Dow Jones US Retail Index soaring last year to an all-time record. Target was having a pretty good year, all things considered. Margins were widening and its expanding click-and-collect operations were paying off.

But it was clear by the middle of last December that inflation was kicking up and consumers were starting to get wary. It was equally clear that the supply chain problem was about to get worse as containers loaded with seasonal goods began arriving after the holiday season was over.

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