Retailers caught short on inventory ahead of sales

Department store giants David Jones and Myer are in a hurry to source stock from suppliers even overseas to cater for higher than expected demand, after being caught out by lowering inventories.

David Jones is reportedly sourcing large amounts of stock from its suppliers this month for its clearance sales, while Myer is reportedly bringing in stock from overseas.

David Jones also said yesterday that strong sales has meant it will not have its main annual July sale this year.

Myer’s managing director Bernie Brookes told The Australian Financial Review that the company has been caught out while trying to reduce inventories.

“The end of June/early July is season clearance, so we normally have as much as 10-20% of inventory we would use in an opportunity to clear as we prepare for trans-seasonal stock.

“What’s happened now is because we’ve driven hard on reducing inventory and buying more correct inventory, the availability of clearance stock is quite minimal.”

Brookes said the company is sourcing stock from overseas due to cheaper air and sea freight rates, and is taking advantage of stock held by Asian companies that usually supply US retailers.

The company has experienced higher than expected demand, with David Jones recording 2% and 3% sales increases during May and June, respectively. Myer now expects mid-to-high single digit increases in earnings before interest and tax for the 2008-09 year.

Retail analyst Rob Lake says retailers should endeavour to find a healthy balance where they are not caught out by retail sales that are higher, or lower, than expected.

“Most retailers feared a tragic 2009, but they haven’t experienced it. So they’ve been caught out. The healthy balance is to look at your stock turn and margin, and you’ve got to try and get a balance that maximises that return.”