U.S. Retail and Wholesale Inventory Performance from 1981 to 2004

T paper examines the inventories of publicly traded U.S. retail and wholesale companies between 1981 and 2004. First, we document that inventory holdings have been reduced. The median of wholesale inventory holding periods was reduced from 73 days to 49 days. Retail inventory did not start to decline until about 1995. Second, we document that firms with abnormally high inventories have abnormally poor long-term stock returns. Third, we illustrate these effects for the cases of Wal-Mart, 7-Eleven (Japan), and some related firms.