Despite lower revenue concerns, major retailers are amping up their capital investments
- Despite retailers warning about lower profits due to slow moving inventory, many industry leaders are doubling down on capital investments.
- Giants like Walmart, Amazon, and Best Buy are increasing their spending. Lowe’s and clothing retailer The Gap are among the only major retailers cutting back on their investment spending.
- Electronics retailer Best Buy is one baffling example. During the first half of the year, its profits dropped more than half, but its investments jumped 37%.
- Retailers seem to be taking lessons learned in the last economic downturn in 2008 and applying them to the current situation.
- During the 2008 to 2009 recession, companies that invested during the downturn were able to double their earnings from 2009 to 2015. Those companies that didn’t invest, saw their numbers stagnate, reports CNBC.
- Investments made now by large companies like Walmart, Amazon, and Home Depot may result in the companies drawing customers away from their competitors.
Why it’s news
Some companies may be tightening their belts in anticipation of a recession, but the majority plan to continue their capital investments.
A survey by research and consulting firm Gartner recently found that executives plan for technology investment and workforce development to be the last expenses cut, if needed.
Different retailers have their focus on different areas. The Home Depot, for example, is planning to improve the supply chain between stores and suppliers. Walmart on the other hand is looking to improve its restocking system so fewer shelves are left empty.
Companies have been upping their investments in technology and workforce development, but COVID accelerated the process.
From 2010 to 2020, the retail sector’s investment in software rose by 123%, according to Progressive Policy Institute economist Michael Mandel.
Some retailers like Kohls and Target are focusing their spending to update and modernize their brands.