We are starting to look back on the pandemic as one giant bubble. There was the stock market bubble, the lending bubble, the real estate bubble. The pandemic saw demand for certain products multiply. There was a shortage of hand sanitizer. These days, there are pallets on sale at the drug store and Walmart, a sign of unrealistic inventory building by retailers.

Clearing out those excesses will be painful. It will result in losses as those mistakes become visible.

Companies bulked up during the pandemic. They saw business booming and they saw the opportunity to take advantage of the disruption in the market created by the pandemic. The traditional bricks and mortar businesses suffered, and those who adopted new technologies and implemented new business systems would thrive.

Where department stores suffered, Amazon benefitted. Where restaurants suffered, Skip The Dishes and Uber Eats benefitted.

Home improvement stores did a booming business during the pandemic, and the supply chain disruptions were legendary. Lowes had 12.5B in inventory in 2019 prior to the pandemic. Fast forward to today, and Lowes has 19.817B in inventory as of October 31. That’s nearly $20B in inventory. Considering the annual revenue is $95B and 33% gross margin, that inventory represents about 120 days of inventory. That’s means three inventory turns per year. That’s low for a retail business. For example, Target usually has about 60 days of inventory. Yes, it’s a different business. Back in 2019, Lowes had no more than 90 days of inventory.


Host: Victor Menasce

email: podcast@victorjm.com