Inventory Boom

BUSINESS & FINANCE

From the black-windowed, sandbag-roofed Manhattan offices of the New York Federal Reserve Bank last week came a jolting report: in February, New York City department-store inventories were 49% above a year ago. Manhattan is the No. 1 U.S. shopping center, but hinterland stores are buying too: total U.S. department-store inventories are well over the 100 mark (1923-25 = par), against 73 a year ago, 54 at depression’s bottom.

Behind this inventory boom is a store-manager panic, a store-buyer picnic. Fearing bare shelves when their stores were customer-packed, storekeepers last summer told their buyers to start buying more and buy it faster. They did. First they bought “hard” lines—radios, refrigerators, kitchen stoves, rubber goods, bicycles, typewriters, etc. Then they rushed after “soft” lines—woolen, cotton and rayon goods, stockings, dresses, men’s suits, shoes, hats. To make sure they got enough, buyers quit the long-standing practice of buying only 60-90 days ahead, started buying for six to eight months. Last week many storekeepers were even placing Christmas orders.

Some stores bought so much so fast that they were almost unable to pay. Most of them squeezed through with short-term loans from local banks. But others borrowed in the open: Manhattan’s R. H. Macy & Co. (which had over $5,000,000 cash last August) six weeks ago borrowed $5,000,000; mail-order house Spiegel, Inc. last year doubled its inventories, jumped notes payable 65% to $16,000,000. Cash-short, many storekeepers are also warehouse-short. Thus Macy’s last week leased a five-story warehouse; other storekeepers stuffed carloads of goods into already crowded warehouses.

Most storekeepers feel that all this is good business. Some of the things they bought (e.g., radios and refrigerators) are already dead ducks. Even if inventories are roof-top high, they expect to sell out long before any post-war slump catches them. But not all retailers are so cocky: giant Montgomery Ward has cautiously set up a $2,000,000 reserve for “price declines.” And from visiting British Storeman Victor Coen came another caution note: “Those British retailers who made heavy advance purchases . . . were sadly disappointed.”