DHL Ceo says Retail Companies are in de-stocking panic

John Mullen, the CEO of DHL, in an interview with the Times, likened the High Street Retail Stores panic destocking as the equivalent to a run on the banks.

A quick walk around the High Street will tell you that they have all given way.  And that even the hardest nosed of the retailers, those that target the upper end of the market and resist the urge to cut prices before Christmas, are now brandishing “20% off everything” signs all over their stores.

Even the ultimate January Sale – Harrods,  are going early this this year.  Harrolds, who have never in their history started their January Sales until the first working day after the new year, start their Sale on December 27th, as well has having 30% off various departments and seasonal reductions already.

The retailers seem to be dumping stocks as quickly as possible, in fear that there will simply be no future demand by shoppers, (even those companies who are generating profits and whose books are sound) and this creates the risk that this has become a self fullfilling prophesy. 

We saw in the last weeks of November and the First week of December a standoff between the retailers and the shoppers.  Retailers were holding off cutting prices in the hope that the shoppers would start buying, and the shoppers were holding off waiting for the retailers to drop the prices.  The shoppers won, and now all retailers are dropping prices further and further desperate to grab a bit of that Christmas spend.

The problem with such a large reduction in inventory levels is that it is likely to hinder the recovery, which will eventually come.  When companies have low invetory levels it prevents them from reacting quickly and flexibly to any upswing in demand.