Jennifer Bartashus on Walmart Earnings (Audio)

retail story in the US. Joining US now as Jennifer Ratasha is here Bloomberg Intelligence Senior Retailed Staples and Packaged Food analyst Jennifer David here, Good morning from Hong Kong and the Age of Pacific. Hope you're well. Are we gonna be okay? That seems to be the headline from Walmart. Yeah,

good morning and thank you for having me with you today. Um, when when we look at Walmart, you know the fact that they beat earnings was a positive sign, but we also have to bear in mind that only three weeks ago they lowered their guidance and then they beat their guidance and so um, you know, so it's it's a good note, but at the same time, you have to

take it a little bit with a grain of salt. Now, some of the commentary that they shared does give some confidence that the back to school season is going well UM, gives the little bit more optimism on their ability to handle inventory UM, which will be very important as we get into the second half of the year. Jennifer Stug in New York, I want to say thanks as well for joining us here on Day Break Asia. Yeah, the

inventory build was a curious phenomenon here. I think that they perhaps misread the consumer early on in the pandemic. Maybe people's tastes have changed, or maybe they've moved away from buying goods to services. I mean, there are different stories here are part of that overall narrative. But as it applies to Walmart, what do we know about the way that they were able to unwind inventory or liquidate, Well,

it's they've done a pretty decent job. And basically, when when we were in the hype of the pandemic, the retailers couldn't get enough inventory UM. And then as the pandemic started to fade, they sort of bulked up and they wanted to be sure that they would be able to remain with things in stock for consumers and not trigger another round of panic buying. UM. But what that led to was kind of an over confidence in how much they would be able to sell in this huge

amount of inventory that they were then sitting on. Now for Walmart, the trickiest part of that inventory excess they have is apparel UM, and they've had a little bit more of a hard time selling through that apparel. They've done a better job with home decore items and electronics UM.

And part of the way they cleared some of that inventory was through the traditional method of rollbacks and lowering prices, but also they ran a Walmart Plus member sales event in June UM and a lot of the items that were part of that sales event were those categories where they had excess inventory. So they took a very strategic

approach and how to decrease that inventory. UM. And they did say on their call today that they've canceled a lot of orders and that they're they're more right sized in their inventory as they looked at the second half of the here. Well, I'm curious then, was that a one off in terms of and the reason I asked this inventory question is I mean, it's it's not the same industry, but for example, Toyota this part of the world,

you look at Day's inventory has been rising. You know, this is a company that's known for just in time, just enough, and they're starting to go just in case in terms of their inventory. Right. So I'm just trying to see whether there's a read through from what Walmart did to the entire industry or even just the Walmart itself in these next few quarters. Well, there's certainly they seem to be learning some of the lessons um and and with with regards to inventory and just the value

of inventory, there there are two factors there. One is um just inflation, and the value of inventory has gone up even if the actual number of physical goods held in inventory hasn't UM So that is part of the story UM. But but more importantly, UM, it seems that Walmart is gotten much smarter in terms of being strategic on where they need to buy and where they've canceled orders.

Um and so that puts us in a pretty confident position that as we as we moved through back to school and we get towards the end of the year, UM, if they've canceled orders that they thought might be an access. That means hopefully that they'll be able to sell through their holiday inventory and the end the year on a very strong note. Um. And we've heard other retailers talk about canceling orders than trying to write size inventory as well. So, UM,

I think we'll hear more tomorrow from the Target. I was just going to ask about that. I mean, so today we had the Walmart stock popping about five percent. I'm looking at Target shares up two point nine percent today. You mentioned the fact that they will deliver numbers tomorrow. Is it it's it the same story or is there things that we really need to tear a pardon in

terms of differentiation? Well, when when we when we compare Walmart and Target, one of the key things to remember is that Target is much more is much less reliant on food sales than Walmart, So overt Walmart sales in total are for food and consume up goals. So that's a huge part of their US business. Walmart is I mean, Target is much more focused on apparel, home decore. Um, and they do sell essentials as well, but it's a

smaller part of their overall business. So tomorrow. For Target, what we're going to be looking at it is that inventory and and UM their management team had taken the track of trying to sort of rip the band aid off and dump as much inventory as possible in the second quarter, So we're going to seem very very weak margins, but hopefully we'll see a much better inventory number come out of Target UM that will set them up for the rest of the year. Okay, Jennifer, good stuff. Always

a pleasure. Thanks for spending time with us. Jennifer Bartoshes, Bloomberg Intelligence senior Retail, staples and package food analysts, joining us on the program.