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Gary Shilling

Rising Inventories Are a Bearish Indicator

Don’t be surprised if retailers are forced into heavy discounting and liquidation sales after enticing consumers to buy early this holiday season.

First come the deals, the come the markdowns.

First come the deals, the come the markdowns.

Photographer: Brandon Bell/Getty Images 

A big inventory cycle may soon unfold as early holiday gift-buying by U.S. consumers reverses and supplies of goods start to leap.

Retailers have habitually strived for sales growth only to end up with excess inventories that require profit-killing markdowns to unload. This year, supply chain disruptions have taken care of excess inventories. So, casting their normal caution to the wind, retailers have stocked up. Target Corp. and Walmart Inc. both chartered expensive ships to import goods ahead of the holiday season and boosted hiring, at the expense of profit margins.