Fashion corporations might sell dreams, but they’re within the business of creating the looks those dreams hang on. 

And business has been tricky. 

The stop and go of the pandemic made an almost unattainable situation for brands and retailers. First, pandemic-driven supply chain backups kept goods from stores. Then a bounce back — and a few overenthusiastic buying — created a glut that retailers have spent the last 12 months clearing out. 

It’s a project that’s only partially accomplished. A sample reading of 20 top retailers by WWD found that only 1 / 4 managed to really reduce inventories last 12 months, while a majority still had inventories up greater than 20 percent.

The caveat is that not every business is similar — some had more inventory than others last 12 months and a few try to maintain up with more growth. Nevertheless it’s a difficulty that nearly every fashion company faces in some way today.

VF Corp. is a superb example.

The corporate, parent to The North Face, Vans, Dickies and more, has long burnished its popularity as a savvy operator but logged nearly $2.6 billion in inventory on its books at the tip of its third quarter, a year-over-year increase of 101 percent. 

Inventory was up 67 percent adjusting for a vendor financing program that modified when VF technically took ownership of the products, but that’s still an enormous increase and an issue that passed from the previous chief executive officer Steve Rendle to interim CEO Benno Dorer. 

“Lengthened manufacturing and freight lead times, larger upfront product buys, unpredicted demand spikes from elevated promotional activity within the quarter, plus higher than normal customer order cancellations add as much as unsatisfactory customer support, elevated inventory and significantly higher costs,” Dorer told analysts after reporting quarterly results.

He said the corporate was taking “aggressive actions” and would work down inventories to “more normalized levels” by the tip of the present quarter.

VF’s laundry list of inventory woes is one that may seem familiar in C-suites across the industry, where a shift of focus is finally putting the back of house front of mind.

“Before COVID-19, the major focus in retail, especially in fashion, was promotion and getting the products to the buyer in the precise fashion, every kind of personalization,” said Inna Kuznetsova, CEO of supply chain planning firm ToolsGroup. “With the ability to deliver that customer a consistent experience became less of a differentiator and more table stakes for numerous fashion retailers.” 

As retailers raced to optimize the shopping experience, supply chains took a back seat or plugged in holes, as an example, with excess goods able to be shipped to maintain up with customer expectations. 

“That made sense through the previous couple of years, as a consequence of every kind of disruptions in shipping and growing lead times in China,” Kuznetsova said. 

Now that shoppers have pulled back — with inflation making the whole lot dearer and the specter of recession still within the air — merchants are beginning to develop into more mindful. 

Kuznetsova said AI powered planning and allocation can assist merchants be rather more precise, keeping stores ahead of the buyer curve while also operating more efficiently and sustainably.  

“When you don’t plan on what number of items will likely be sold, for those who don’t work on reducing the surplus inventory, if  you don’t plan it well, you might be doomed so as to add shipments back from the stores to other stores and each shipment means CO2 emissions,” he said.

Getting it right — or as right as possible — is something that just some brands have put real emphasis on.

“We still do see some retailers attempting to do their planning on Excel sheets,” Kuznetsova said. “There’s a reason why you could not discover a certain brand on the shelves of TJX” the off-price giant that buys goods that full price stores have trouble clearing. 

Consultant Timothy Derr, a partner in Kearney’s  consumer practice, agreed that the trick — or a part of it — is to each have some form of “demand sensing” to know what’s needed where after which a method to act on that information. 

Easy enough to say, harder to make work within the long and complicated strategy of getting inventory from factory to storefront.

Derr said corporations are pushing ahead with each short- and long-term solutions.

“We’ve been implementing inventory war rooms to tackle the upswing in inventory,” he said. “Nevertheless it’s also about making these long term decisions. You possibly can liquidate all you wish, but for numerous corporations, it’s getting this overall operating model set.”

It’s an enormous ask after the marathon of the pandemic, financial crisis and company reinvention. 

“Lots of these corporations have tried to fight fires and stay stable during COVID-19, which is a frightening task in itself,” Derr said. 

However the world won’t stop and wait for fashion to catch up.

“The most important piece is having an operating model that may pivot when you’ve got demand sensing,” he said. “The thought of, what levers are you able to pull? We now have the inventory coming in. Is it pricing and promotion [that will address any disconnects]? Is it early enough in the method that we’d like to cut back buys? Do we’d like to take into consideration how we manage our inventory versus core product and seasonal product in the longer term?

“That is the number-one priority for numerous retail leadership teams and I feel you’re going to see that step change this 12 months,” Derr said.