Improve or Lose

​From an inventory management perspective, the economy is becoming more efficient. Companies that embrace change and innovation are likely to increase their efficiency and profitability. ​

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  • ​​The ratio of inventory-to-sales across U.S. retail (excluding autos) fell to its lowest level on record recently. This means that retailers, along with their entire supply chain, have been growing their businesses while keeping fewer goods in stock. This boost of productivity across many companies can lower prices for consumers, lift wages and improve living standards.

  • Technology is driving down inventory levels. Enterprise data is increasingly digitized and communicated faster, giving supply chain participants access to near real-time data about inventory levels. These improvements are reducing inventory levels in industries from apparel to food. As more devices become connected, these efficiencies will grow. Retail shelves will tell a store that inventory is low and technology will route that message to the manufacturer. A process that once took weeks may take minutes, clear evidence of innovation’s power. 

  • Winners in this trend are likely to include companies that embrace digital transformation. For example, online retailers typically carry half as much inventory relative to sales as traditional retailers. Other beneficiaries may include companies that enable digital transformation, such as semiconductor or semiconductor equipment companies, as well as software companies that facilitate the flow of data.
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The views expressed are the views of Fred Alger Management, Inc. as of January 2019​. These views are subject to change at any time and they do not guarantee the future performance of the markets, any security or any funds managed by Fred Alger Management, Inc. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities.

This material must be accompanied by the most recent fund fact sheet(s) if used in connection with the sale of mutual fund shares. ​

Risk Disclosure: 
Investing in the stock market involves gains and losses and may not be suitable for all investors. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Many technology companies have limited operating histories and prices of these companies' securities have historically been more volatile than other securities, especially over the short term. Technology companies may also face increased competition, government regulation, and risk of obsolescence due to progress in technological developments. 

Fred Alger & Company, Incorporated 360 Park Avenue South, New York, NY 10010 / www.alger.com

800.305.8547 (Retail) / 212.806.8869 (Institutional) 


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