If there was any doubt Bed Bath & Beyond (BBBY) is truly struggling to get its hands on enough inventory, CEO Mark Tritton just wiped it away. As he explained during the second-quarter conference call on Sept. 30, "[W]e do see supply chain pressure continuing, both in cost and lead time." Tritton backed up his comment by cautioning shareholders that same-store sales for the quarter currently underway would likely be flat, ultimately translating into full-year earnings of between $0.70 and $1.10 per share. Analysts had been modeling a fiscal 2021 bottom line of $1.32 per share.

And it's not just Bed Bath & Beyond. Shares of athletic apparel maker Nike (NKE -0.23%) also recently tumbled after the company dialed back its full-year revenue guidance due to supply chain woes. Department store chain Kohl's (KSS -1.52%) was recently downgraded by Bank of America to a rating of underperform with analyst Lorraine Hutchinson citing its struggle to get inventory into stores. Dollar Tree (DLTR -1.30%) is in the same proverbial boat, as are a slew of other retail chains.

Still, it's difficult to get a grasp on just how big the supply chain problem really is. Fortunately for investors, there's a metric that puts things in perspective. Unfortunately, this fiscal measure's condition may paint an even more alarming picture than what is currently expected for the retail industry.

A fleet of freight trucks parked near a large warehouse

Image source: Getty Images.

You can't sell it if you don't have it

It's not a commonly considered data nugget, even for store chains. These are unusual circumstances though, where consumers stand ready to spend their money with retailers that have the right merchandise.

The metric in question is a simple comparison of a retailer's on-hand inventory versus that chain's most recent quarterly sales figure. You'll often see it expressed as a ratio, although some sources provide it as the number of days -- at its current sales pace -- it would take to sell through all of that merchandise. Both point to the same premise.

And as you might suspect, inventory-to-sales ratios have turned downright ugly since early 2020 for many names in the business. As of Feb. 2020, U.S. retailers (excluding the automotive industry) collectively boasted an inventory-to-sales ratio of 1.43. As of July 2021, that figure has fallen to 1.11, which is still within sight of April's all-time record low of 1.07. The visualization of this data from the U.S. Census Bureau below puts things in perspective.

U.S. retailers are running low on inventory due to supply chain disruptions.

Data source: U.S. Census Bureau. Chart by author.

It's not as if things have improved in the meantime either. Indeed, for some retailers, supply chain problems may have been exacerbated over the course of the past quarter. That certainly seems to be the case for Bed Bath & Beyond, which reported a year-over-year same-store sales drop of 1% for the three-month stretch ended Aug. 28, despite huge strides made in terms of pushing back on COVID-19's impact.

Bed Bath & Beyond's inventory levels are nearing dangerously low levels.

Data source: Thomson Reuters. Chart by author. Dollar figures are in millions.

Meanwhile, Nike and Kohl's are exhibiting a similar deterioration in inventory levels with each at or near rock-bottom supply levels for this particular time of year. Although not shown, Dollar Tree's inventory picture is just as troubling.

Kohl's and Nike are running out of enough inventory to meet demand.

Data source: Thomson Reuters. Chart by author.

And remember, Tritton suggested more than once during Bed Bath & Beyond's earnings call that he sees his company's "supply chain pressure continuing, both in cost and lead time." Nike doesn't think it's nearing an end either. CFO Matthew Friend conceded during last month's fiscal 2022 first-quarter call, "We now expect fiscal '22 revenue to grow mid-single digits versus the prior year versus our prior guidance of low double-digit growth due solely to [...] supply chain impacts."

The industry as a whole looks like it's headed into the all-important holiday shopping season not only understaffed but undersupplied as well.

Investors better buckle up

The headwind will eventually end, but even before then, each of these retailers is adapting. Bed Bath & Beyond continues to beef up its private-label efforts with the introduction this month of home decor house brand Studio 3B, circumventing at least one supply chain middleman. As Dollar Tree CFO Michael Witynski noted during his company's most recent earnings call, Dollar Tree is now "using dedicated space on chartered vessels for the first time, including one large vessel contracted for three-year term." Nike is responding, too.

These are only small answers, however, to an enormous problem. Relative to sales, retailers only have about three-fourths the amount of inventory they had prior to the pandemic's arrival in the U.S. Consumers can't buy something that's not available, setting the stage for disappointing holiday results.

In other words, buckle up for a challenging end to the year for many retailers.