Luck is not a strategy

Companies began declaring victory over their own inventory levels this week (talk about knocking down a straw man).  News articles abounded with reports that Target and TJ Maxx achieved great successes in their struggles to properly manage their inventory levels.  Victory celebrations are tempting; however, luck is not a strategy.

Target reports inventory levels are down 16% from the prior year, and their gross profit margin has increased from 25.7% to 26.3%.  In regards to sky high inventory levels reported in 2022, Target's Chief Operating Officer has triumphantly stated their struggles with inventory are "in the rearview mirror."  The CFO for TJ Maxx reported any concerns regarding inventory levels were no longer warranted.  The retailer "feels great" because they are positioning themselves to capitalize on the current drive for deal hunting amongst consumers. 

Both companies are seeking to lower their inventory levels.  They were surprised to accumulate record inventory in 2022; which is a clear indication they did not match their inventory levels to the market-demand for their products.  In order to reduce inventory, Target and TJ Maxx were fortunate to benefit from using sales and other marketing to reduce their inventory levels.  Neither company is seeking to use an inventory strategy that effectively matches their inventory levels to the market-demand. They did not pay attention, and circumstances drove inventory sky-high; costing both companies millions. Circumstances have allowed them to reduce inventory; but, neither indicates they are even trying to meet the market-demand. Their minimal levels of success were only driven by luck.

Neither company had an effective inventory strategy in 2022, and nothing indicates they have one now.