Home Depot, Others Move to Shrink Store Inventories

Home Depot has begun a new inventory strategy. The retailer is targeting sales growth of nearly 15 percent by 2018 but wants to keep inventory levels flat. That means fewer items on the shelves.

It is a model emerging as retail companies seek ways to drive up profits, meet needs of online shoppers, and reduce the financial burden of their network of stores.

Among retailers making the shift is Wal-Mart Stores. It has reduced what it stores in its back room and widened aisles to reduce the amount of goods on its shelves. In the first quarter, Wal-Mart’s inventory rose more slowly than sales, helping to improve gross profit margins.

“It’s like oxygen in the store,” Wal-Mart CEO Doug McMillon said at the company’s annual meeting. “The weight of inventory has been relieved to an extent. And I think that bodes well for the future.”  

Source: Wall Street Journal