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Sell, store or dump! What companies will do with surplus stock

HYCM

By Giles Coghlan, Chief Currency Analyst at HYCM

The problem of surplus stocks for companies

Piles of surplus stock have built up over COVID-19 shutdowns. So it is with interest that I came across an interesting piece on Reuters about what companies are going to do faced with this problem. The lockdowns are now lifting and retailers will be deciding what to do with all the surplus stock.

The options

The key options are keeping it in storage, holding a sale, or selling goods to discounted retailers that will sell branded goods at heavy discounts. Excess stock is a large issue as in the UK the real estate company Knight Frank had taken inquiries for excess stock totaling over 6 million square feet of short-term let warehouse space in the UK since COVID-19 broke out.

The risks

The aging inventory problem. Unlike wine, one of the issues for retailers with storing items of, say clothing, is that inventory gets worse with age. So UK high street retailer Next and German sportswear brand Adidas have stored away basic ‘evergreen’ items that they will offer to shoppers next year.

The return to the shops? A big bounce back?

So, although retailers hope that people will head back to the shops post COVID-19 lockdowns, this is not guaranteed. Some habits may change and stay different. Many people are increasingly concerned about a ‘throw-away’ clothing culture and may be slower to buy than anticipated. Will pent up demand be unleashed into the stores?

Disposing of stock?

In the UK the Parker Lane Group, which helps companies manage excess stock, is dealing with around double its usual volume of up to 1.5 million items of apparel per month, according to its founder Raffy Kassardjian. He said: “Some of our customers are waiting for retail to open up to gauge their performance before they make a commitment on how much stock they want to write off” referring to both selling at discount in-store and offloading to off-price. So, there is going to be a scrabble to shift this inventory and is a story to watch going forward for retailers and Q2 data.

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