Morgan Stanley says jaw-dropping inventory levels a ‘key risk’ to retailers

There's a 19% discrepancy between inventory levels and sales growth

Retailers still have way too much stuff. (AP Photo/Andy Wong)

A Monday report from Morgan Stanley’s equity team said inventory is a “key risk” to retailers and electronic goods manufacturers. Thank skidding demand amid a glut of inventory

Morgan Stanley highlighted retailers like Best Buy, Gap and Williams-Sonoma as most exposed to these inventory risks. In the goods industry, Morgan Stanley said there’s a 19% discrepancy between inventory and sales growth.

Companies with high consumer exposure have slashed their ordering — even though this time of year tends to be when retailers are beefing up their warehouses ahead of the holiday season.

According to the Morgan Stanley Shipper Survey, in which some 100 corporations regularly share their transportation needs and macro expectations, net ordering levels have reached the lowest point in the survey’s 12-year history. Ordering levels are down 40% year over year. Net inventory levels are also unusually high.

“Almost half of respondents say that their inventory is higher and ordering is lower going forward — which firmly indicated an over-inventoried/de-stocking condition,” wrote Ravi Shanker, who is Morgan Stanley’s lead transportation equity analyst. 

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    Rachel Premack

    Rachel Premack is the editorial director at FreightWaves. She writes the newsletter MODES. Her reporting on the logistics industry has been featured in the New York Times, the Wall Street Journal, Bloomberg, Vox, and additional digital and print media. She's also spoken about her work on PBS Newshour, ABC News, NBC News, NPR, and other major outlets. If you’d like to get in touch with Rachel, please email her at rpremack@freightwaves.com or rpremack@protonmail.com.