By Liz Young
Retailers selling merchandise from kitchenware to sneakers are stockpiling goods in an attempt to blunt the impact of the Trump administration's new tariffs on their bottom lines.
Companies from large retailers such as warehouse chain Costco Wholesale to specialty merchants such as home-goods retailer Williams-Sonoma and apparel seller Zumiez say they are holding more inventory after placing unusually big orders to beat Trump's new tariffs.
The strategy is a hedge against the costs of increased tariffs, but logistics experts say it opens up retailers to the risk of getting stuck with piles of unsold goods as consumer spending slows.
"On the one hand, I'm going to have higher prices on anything I import. On the other hand, there's a chance that consumer demand is going to drop down a bit and I'm going to have to hold on to these inventories," said Zac Rogers, a supply-chain professor at Colorado State University.
The tactic represents another shift in retailers' yearslong battle to perfect their inventory-management strategy after the pandemic, when stock levels whipsawed from product shortages to overstocks.
Many companies had moved toward managing inventories on a just-in-time basis over the past year and a half to avoid getting stuck with goods shoppers didn't want. Some are now switching instead to a just-in-case strategy and keeping extra stock on hand.
Costco's inventories were up about 10% compared with the previous year in the three months ended Feb. 16, according to company filings. "We have been continuing to buy more inventory, which we think will be helpful as you think about some of the unpredictability that we've seen in supply chain timing and also with the potential risk around tariffs," said Gary Millerchip, Costco's chief financial officer, on an earnings call March 6.
Williams-Sonoma said inventory was up 6.9% for the quarter ended Feb. 2. The company said the elevated inventory level included shipments that were pulled forward from China to reduce the potential impact of increased tariffs.
Zumiez reported inventories up nearly 14% in the quarter ended Feb. 1, partly due to the company bringing in inventory early "in anticipation of the tariffs planned to go into effect late in the quarter," said Chief Financial Officer Christopher Work on an earnings call this month.
The Logistics Managers' Index, a monthly survey of supply-chain managers, showed inventory levels expanded in February at the fastest rate since June 2022.
The ports of Los Angeles and Long Beach in California, the main gateway for imports from China, were flooded with container volumes last seen during the Covid-19 pandemic to start the year. The port complex handled the equivalent of 955,480 import containers in January, a 25% increase from the same month last year, and 781,995 import containers in February, up 5.9% from 2024.
Logistics experts warn holding more inventory comes with the risk that consumer demand dries up. Consumer sentiment in the U.S. sank this month as shoppers worry over what tariffs might mean for the economy.
U.S. retail sales ticked up a seasonally adjusted 0.2% in February from the prior month, according to the Commerce Department, less than the 0.6% gain economists polled by The Wall Street Journal expected.
Retailers have stocked up on merchandise to avoid more than just tariffs. Some were preparing for the possibility of a strike at East and Gulf Coast ports amid labor negotiations, as others placed large orders to get ahead of Lunar New Year when factories across Asia close for weeks.
Target reported inventory was up about 7% year-over-year for the quarter ended Feb. 1, ahead of 1.5% growth in comparable sales, those from stores and websites operating at least 12 months. The retailer pulled forward goods to carry more new items in its apparel and hard-lines categories, opened new food distribution centers and sought to improve product availability.
Walmart said its inventories were up about 2.8% for the quarter ended Jan. 31 as comparable sales grew 4.6%. "We did pull a little bit forward around the edges, but we're selling through that stuff quickly," said Chief Executive Douglas McMillon on an earnings call Feb. 20.
Write to Liz Young at liz.young@wsj.com
(END) Dow Jones Newswires
March 24, 2025 12:04 ET (16:04 GMT)
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