Lighter Inventory Boosts Retailers, For Now

For U.S. retailers, lighter inventory is in vogue. In a sector with shrinking sales, however, it is only one piece of the profitability puzzle. As third-quarter results roll in from department stores such as Nordstrom, Macy’s and Kohl’s, as well as many specialty retailers, lighter inventory has been a constant theme. For many, this has meant less discounting and better gross margins. That trend could make for a relatively strong fourth quarter, marking a swift reversal in sentiment for a sector that just last spring many investors were writing off as doomed. Shares of Nordstrom, for one, have climbed 30% since the company reported fiscal first-quarter results on May 12. But light inventory can cut both ways, and investors may not be properly accounting for that risk. Read more at The Wall Street Journal.