By Nathaniel Meyersohn, CNN Enterprise
(CNN) — Retailers are overstocked on clothes, and a few are packing it away in hopes of promoting it in future seasons.
Kohl’s, Hole, Carter’s and different chains have mentioned in current weeks that they are going to maintain some unsold merchandise of their warehouses and put it again on cabinets later this yr and in 2023. It is a technique often known as “pack and maintain.”
“We’re assured that we can combine our pack and maintain stock with future assortments,” Hole finance chief Katrina O’Connell mentioned on an earnings name with analysts final week. Hole plans to stow away shorts, short-sleeve t-shirts and tank-tops.
The retailer mentioned that its stock elevated 37% throughout its newest quarter, with 10 proportion factors of the rise ensuing from pack and maintain.
Kohl’s mentioned it was retaining an additional $82 million price of stock, together with sleepwear and fleeces, and can promote it forward of the upcoming vacation season. Carter’s will maintain onto some fall and winter gadgets it deliberate to promote at its personal shops and at different retailers.
These retailers and plenty of others have a glut of clothes partially as a result of client demand has weakened.
“We’re packing and holding stock given the slowdown in demand we have seen in current months,” Carter’s CEO Michael Casey mentioned on an earnings name final month.
Some customers, significantly lower-income customers, have reigned of their discretionary purchases because of increased inflation. Moreover, many patrons refreshed their wardrobes earlier within the pandemic and do not want one other pair of sweatpants or a brand new search for the workplace.
Retailers haven’t got limitless house to retailer stock and should resolve what to do with their unsold merchandise.
Some corporations are responding by marking down merchandise and stepping up promotions to attempt to juice demand. Though discounting helps retailers rapidly minimize their losses and frees up house to usher in new gadgets, it will possibly additionally dilute a model’s picture.
“Selling may be low-cost right now and really costly tomorrow,” mentioned Simeon Siegel, an analyst at BMO Capital Markets.
Holding onto extra merchandise provides chains another choice to resolve their stock puzzle.
There are a number of advantages to this technique: retailers haven’t got to right away write off merchandise or low cost them and may intention to promote them at increased costs when client demand strengthens. They sometimes pack away fundamental gadgets which can be unlikely to exit of favor sooner or later.
However holding onto extra merchandise is dear, and there is a danger that yesterday’s stuff will not promote in future seasons.
“A retailer would not wish to tie up their stock {dollars} in merchandise that are not shifting,” Siegel mentioned.
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