Earnings reports from the nation’s largest retailers for the first quarter recently spooked Wall Street into a broad collapse. Executives of major chains blamed lower profits and margins on a sudden, “unexpected” shift in consumer spending behavior — from merchandise to experiences, like travel and dining.
Analysts who follow the industry declared their disappointment and reduced their investment ratings.
The five-day swoon in share prices that followed drained industry balance sheets by a total of about half a trillion dollars in equity.
But no one should have been shocked. The glut of inventory that retailers are choking on now was predictable — in fact, it was predicted.
In December, in this column, we warned about the whipsaw effect of the tangled supply chain. Even before the holiday season was finished, it was clear that late-arriving cargos were going to fill retailers’ warehouses with goods that were out of season and, as it turns out, out of step.
That’s precisely what happened.