Exploring Inventory Trends In Six U.S. Retail Segments

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Executive Summary

The authors find that inventory is positively correlated to gross profit dollars but negatively correlated to gross margin return on inventory. This supports a potential explanation: Inventory trends may reflect the use of higher inventory levels by retailers to drive increased profits but with overall reduced gross profitability returns on the inventory investment. These results support the notion that the increased deployment of large-store, multiple store formats and the strategy of channel blurring by retailers, have generally increased both inventory levels and gross profit dollars across retail segments.

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