Clearance Sale Analysis: Retailing Woes Stagger H&M and Toys “R” Us

Confidence amongst retailing analysts was rocked last month by two successive announcements.

H&M’s most recent quarterly report, which revealed it had accumulated over $4.3 billion in unsold inventory, shocked retail analysts. In an era of on-the-fly inventory replenishment where stocks are closely matched to sales, a spike in unsold inventory is a strong indicator of trouble ahead. The news left analysts questioning H&M’s competitiveness in the fiercely contested global apparel category, where ever-changing consumer preferences demand agility in managing inventory levels.

In the other major announcement, Toys “R” Us officially closed its doors to shoppers. The retailer’s losses continued to pile up and the chain groaned under a mountain of debt, leaving it little choice but to close down. “The stark reality is that the (chain is) projected to run out of cash in the U.S. in May,” it said in its bankruptcy filing.

While the emergence of the online shopping phenomenon hasn’t helped Toys “R” Us, its ongoing afflictions largely reflect strategic missteps that predated the online shopping boom. In a category where the shopping experience is all, the retailer failed to adapt to changing consumer expectations. The warehouse context which shaped the retailing did little to promote toys sales or communicate the sheer breadth of inventory carried by Toys “R” Us.

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