Retailers Warn Of Dropping Demand While Warehouse Inventories Swell
Inventories are swelling in warehouses across the country as retailers increasingly warn of sluggish demand ahead.
Walmart cut its quarterly and annual profit forecast this week, and Target trimmed its second-quarter projections last month. Both retailers said that a backlog of inventory was part of the problem, and there is no sign that packed warehouses will empty out any time soon, CNBC reports.
“We’ve also seen a 20% year-over-year rate increase for warehouse space, so we are seeing significant inflation there,” Warehouse Quote CEO Ben Hagedorn told CNBC. ”We are also reporting seven consecutive quarters of positive net absorption. Warehouse capacity for imports remains to be an issue across the U.S.”
“If the last two years taught us anything, it’s you have to make sure products are on the shelves and can be delivered through e-commerce and parcel delivery,” Hagedorn said.
Target and Walmart are among many retailers struggling with an inventory pileup, but not everyone is concerned. Dick’s Sporting Goods, which is looking at 40% more inventory now than the same time last year, called the overage “healthy,” CNBC said.
Available warehouse space is in short supply, with single-digit vacancy spreading across the country. Near ports, vacancies hover below 1%, CNBC said.
Amazon's slowdown in warehouse leasing and pivot to becoming an owner-operator will have ripple effects through the sector, with some anticipating a bumpy road ahead while others say that Amazon's step back will free up needed materials and labor for other developers.
