They went from one extreme to another. The explosion of consumption on the back of state aid and withdrawals hit inventories directly. There were not a few businesses with bankruptcies stock that before the growing wave of consumers might not cope. A year earlier, the logistics crisis had also contributed its share: the lack of containers, hand in hand with the closure of ports impacted by the pandemic, also complicated merchandise flows. In the first quarter of 2022, the pendulum swung to the other extreme: Retail inventories reached record levels. The INE index reached 162 points, the highest figure since records have been recorded. Only in the third month of the year the stock increased by 7.4% compared to February, an increase that has been accelerating since the second half of last year. And as of November, advances are already double digits per year. In twelve months, the data has risen 29.8%.
“The growth is very strong, despite the fact that we are comparing ourselves with low data,” says the Manager of Studies of the National Chamber of Commerce (CNC), Bernardita Silva.
And all this has had a direct correlation in the companies of the retail. Between December and March, Falabella’s inventories in the department store business rose 25%. At Cencosud, which operates in Paris, progress in this segment was 32%, while at Forus the inventory jumped to 40%… and so on and on (see infographic). An international phenomenon: according to Bloomberg, the inventories of S&P consumer companies rose to US$44.8 billion in the quarter, a figure 26% higher than a year ago, causing giants such as Walmart to pay for storage and others so many cut prices.
In Falabella they explain that, given the high demand for products, inventories in 2021 reached exceptionally low levels. “Currently, this situation is normalizing,” they stress. In fact, Forus, which reported a strong quarterly increase, accused that in January and February, the stock was particularly low, given the delays in replenishment.
In Falabella they precisely indicate that the pandemic affected the production and transportation chain, causing the process time that the order takes from the time it is shipped until it reaches the warehouses or stores has increased. This delayed deliveries of merchandise in transit, also affecting inventory volumes. In fact, from other retailer They add that such a delay caused products to be put together, and that, in fact, some should be stored to arrive following the season.
Specifically, in department stores, in addition, the high figure for the quarter was driven by purchases prior to the Cyber event, held at the end of May, which concentrated Falabella’s bets on its own imported products.
To this was added an exchange effect. In the sector they explain that if before they were buying with a dollar at $700, now it exceeded $800, hitting the total value of the inputs. “We think that the current levels are normal and incorporate several lessons learned from recent years regarding logistical difficulties,” says the manager of Studies at the Santiago Chamber of Commerce, George Lever.
According to the analyst, 2021 was the abnormal year. The companies, in fact, had planned for a more restrictive year and with lower levels of activity. However, State aid plus fund withdrawals put pressure on demand to unexpected levels. In addition to the logistical problems. “All these effects generated a drop in inventories for that period, which would be the ‘abnormal’ observations,” says Lever.
Shelter from a similar year also raised orders. It is that although last year was low, the data for this exercise still exceed pre-pandemic levels. If Paris inventories in the first quarter of 2020 were $243 billion, now they are $268 billion. In Hites they jumped from $44,367 million two years ago to $82,655 million, 86% more.
In a multistore they assure that now the standard with which inventories are analyzed is different. An additional amount is required to have a backup in case the logistical conditions get complicated once more. “Given the greater uncertainty regarding the foreign trade and domestic demand chains, the optimal inventory levels today are higher than those that prevailed before the pandemic, so the sector adjusts to a greater safety margin,” Lever underlines.
Bernardita Silva, however, adds an additional fact: the slowdown in consumption. “Imports are still very strong, but sales are already beginning to slow down, and stocks are beginning to accumulate.” A year ago, in the midst of a consumer boom, Falabella’s inventory rotated in 98 days, now it takes 128. And Sodimac’s inventory jumped from 50 to 89 days.
Worldwide, there is already retailers who have taken action on the matter. The North American chain Target assured this week that it would lower the merchandise and cancel the orders to adjust the size of its inventory. The semester had ended with a stock 43% higher than a year ago. A similar situation occurred at Walmart. Its merchandise rose 32% to March. And they estimated that it would take only two months to stabilize it. At Macy’s the rise was 17%.
In the national market, they estimate that if a greater inventory is accumulated than the demanded, price drops would be activated, and the liquidations that were not seen last year would be resumed.
