Inventories are swelling in warehouses across the country as retailers increasingly warn of sluggish demand ahead.
Walmart cut its quarterly and annual profit forecasts this week, and Target cut its second-quarter projections last month. Both retailers said that a backlog inventory was part of the problem, and there is no indication that packed warehouses will empty any time soon, CNBC reports.
“We’ve also seen a 20% year-over-year rate increase for warehouse space, so we’re seeing significant inflation there,” Warehouse Quote CEO Ben Hagedorn. “We also report seven consecutive quarters of positive net absorption. Warehouse capacity for imports remains an issue in the United States”
“If the last two years have taught us anything, it’s that you need to make sure products are on the shelves and can be delivered via e-commerce and parcel delivery,” Hagedorn said.
Target and Walmart are among many retailers struggling with a buildup of inventory, but not everyone is affected. Dick’s Sporting Goods, which now sees 40% more inventory than the same time last year, called the excess “healthy,” CNBC said.
Available storage space is scarce, with single-digit vacancy rates spreading across the country. Near the ports, the vacancy fluctuates below 1%, CNBC said.
Amazon’s slowdown in warehouse leasing and its pivot to become owner-operator will have ripple effects in the industry, with some anticipating a bumpy road while others say Amazon’s pullback will free up materials and the manpower needed for other developers.