Bed Bath and Beyond, Nike, Target, what risks do they all have in common?

Company News

by Melissa Darmawan

Profit updates from retailers casted a shadow over investors on Wall St as they grapple with concerns around the Fed’s path to rising interest rates to combat soaring inflation.

Bed Bath and Beyond told investors that chief executive officer (CEO) Mark Tritton is set to step down. Sue Gove, an independent director of the company's board has been named as the interim CEO. Ms Gove said that she's aware of macroeconomic issues like inflation, and the change in habit around consumer spending as she is set to take the helm.

Like many of its retail peers, the company has been struggling with higher costs and supply chain disruptions. A report from Bank of America, claims that the stores have been cutting air conditioning to reduce expenses during the Summer.

This followed the news from Nike after the sportswear retailer provided a downbeat full-year forecast. The company is also struggling with higher costs around transportation and delays in shipping.

However the narrative isn’t a huge surprise. Earlier this month, Target cut its profit outlook as the retailer focuses on removing excess inventory which is up 43 per cent year-over-year at US$15 billion at the end of first quarter of 2023.

Excess inventory means that companies will have to discount the price of goods versus increasing their prices to cover the higher input and transport costs. This will crimp their margins.

Around the supply chain narrative, these companies have established relationships with vendors and shipping companies which has given them their competitive advantage. If they are having challenges, small to medium enterprises will certainly be too.

However, since retail spending makes up 70 per cent of the US GDP, fears about the outlook for consumer spending are likely to weigh on the shares in the near term.

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