What are you going to do now that the bubble has burst?

Photo by Nathan Dumlao on Unsplash

Finally, volume retailers have gotten their hands on all that lovely home merchandise they were chasing after for months. Alas, the bounty arrived just as consumers decided they need to be more mindful of their spending. And when they do lay out their cash, they’re pretty much set with home stuff, thank you very much.

Suppliers have been saying since early this year that buyers were starting to pull back on order writing. More recently, we’ve been hearing that some buyers are completely done with orders for 2022. That state of affairs was confirmed in late May as a parade of major home textiles retailers reported their first quarter results.

Macy’s singled out soft home in particular as a popular pandemic category that has suddenly lost its luster. In the short space between Q4 2021 and Q1 2022, the department store saw a 20 point drop in sales of home textiles, casual apparel and activewear. Company chairman and CEO Jeff Gennette described the downturn as “more extreme than we expected.” Go-forward orders have been adjusted accordingly.

The era of major home makeovers seems to have ended for Target’s shoppers as well. Home saw a rapid slowdown of year-over-year sales beginning in March. While some of that was expected, “we didn’t anticipate the magnitude of that shift,” said chairman and CEO Brian Cornell. Overloaded with inventory, Target has opted to cut prices as it works to right-size its assortments.

At Ross Stores, apparel has re-asserted itself as the sales-driving category. While the off-pricer sees boatloads of deals on home goods in the market, it may not wind up buying many of them. Ross received its Q2 home goods imports earlier than expected, and with demand for the category declining, it has chucked them in packaway and will flow the merchandise later in the year as warranted.

The story rolled on similarly at Walmart (customers pivoting away from discretionary goods), Kohl’s (home sales down 17% and demand expected to remain weak) and Big Lots (moving focus to opening price points and looking for close-out opportunities).

To be fair, home wasn’t a washout everywhere. TJX Cos.’ home comp fell back in against a tough comparison, but sales remained solid. Williams Sonoma Inc.’s nameplates had a pretty strong first quarter as well.

It’s also important to remember that even the retailers that failed to shine in the first quarter are generating better sales than they were in 2019.

So, what are suppliers to do about it? They’ll do what they’ve done in every other calamity that has besieged this crazy business. Dig in, innovate and differentiative. The bubble has popped. Time to get back to the regular order of business.