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Gap and Kohl's to use off-price inventory strategy more commonly seen with retailers like TJ Maxx

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Posted at 5:53 PM, Aug 30, 2022

Full-price clothing retailers Gap and Kohl's are set to try out a pack-away strategy to try and offset losses experienced during last holiday season's markdown prices.

As industry publication Retail Wire reports, the practice is more commonly used by off-price retailers like the parent company for TJ Maxx and off-price retailer Nordstrom Rack.

Last week Gap said the strategy could help the company improve its use of cash flow and improve shareholder value for future seasons.

Gap CEO Bobby Martin said, "early results have been favorable with strong consumer feedback."

The company believes it will be able to mix in clothing stored away with new clothing that comes in and is put out for sale in the months ahead.

Gap finance chief Katrina O'Connell said, "We're confident that we will be able to integrate our pack and hold inventory with future assortments."

As CNN Business reported, Kohl's announced it was keeping an extra $82 million in inventory and plans to sell it before the upcoming holiday season.

Weakening consumer demand amid steady inflation has these retailers trying to find ways to manage their bloated inventory without future losses in revenue.

The CEO of another retailer, Carter's, is also employing the strategy.

Michael Casey said on an earnings call, "We are packing and holding inventory given the slowdown in demand we've seen in recent months." 

While the strategy seems like it could work, storing inventory come with a cost, and there is no guarantee that the merchandise will sell in future seasons.