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Will Christmas 2022 be the terminal squish of retail’s mushy middle?

December 15, 2022Written by RetailWire Staff

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Retail’s long-struggling “mushy middle,” consisting of mid-price retailers without a strong value proposition and brand identity, has taken a bigger holiday hit than more strongly differentiated retailers, according to one retail expert. Retail expert and RetailWire BrainTrust member Katie Thomas, lead at Kearney Consumer Institute, told Yahoo Finance that retailers in the middle have had to discount hard during the holiday season. Price cuts for some Black Friday sales reached as high as 60 percent, indicating that these types of retailers, in particular, are sitting on a great deal of backstock. By August of this year, retailers such as Gap, Express and Kohl’s were already announcing plans to integrate packaway inventory from the previous year into their sales mix. Express, in particular, on its first quarter conference call said that it only packed away inventory that already had a high sell-through online and that fit in with the planned architecture of the product assortment — features that the chain believed would allow it to sell the merchandise at full price despite being held for a year. The reality of the stock position that Express and similar retailers now face, however, paints a picture of a less controlled inventory strategy. Retailers have been putting “stashed away mountains of unsold basics” on clearance in attempts to get rid of the product, according to Reuters. This includes past-season merchandise like shorts and summer dresses. Lockdowns, reduced foot traffic and supply chain shakeups during the pandemic have disrupted retailers’ ability to sell through merchandise as anticipated. Retailers that have performed better throughout the pandemic overall have still faced inventory issues. Target, for instance, even though it lives in the lower tier of the market, earlier in the year announced that it would be putting merchandise on markdown in order to right size its inventory and lowered its second quarter forecast as a temporary move while managing pandemic-era difficulties and returning to sustainable growth. By Q3, however, Target was still having problems. It experienced a same-store sales decline in October, despite running major promotions during the month. Target attributed much of the slowdown to consumer headwinds like inflation.

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