Good morning, CFOs. Retailers have stockpiled inventory heading into the holidays; OpenAI and AMD’s multibillion-dollar partnership; plus, the Supreme Court will not hear BDO's petition on auditor liability.

Retailers are sitting on a pile of goods. Now the question is, will the U.S. holiday shopper bite?

From Ralph Lauren to Levi Strauss and American Eagle Outfitters, retailers have bulked up their inventory, an intentional move to get goods before import tariffs went into effect. The risk heading into the crucial holiday shopping season is that inflation-wary shoppers won’t spend as much or will buy fewer items because prices are higher. For some retailers, this could mean deep discounting to work through excess inventory, which would ultimately hit margins.

As companies start to report on this year’s third quarter, analysts are looking for signs of trouble in the form of inventory growth that is outpacing sales growth. For some companies, this is already happening. Lululemon Athletica’s inventory was up 21% for the three months ended Aug. 3 compared with a year earlier, primarily because of higher tariff rates and foreign exchange, executives said last month. Units were up around 13%. The athletic apparel brand expects sales growth between 3% and 4% in its next quarter.

At Ralph Lauren, net inventory was up 18% for the three months ended June 28 compared with a year earlier, which Chief Financial Officer Justin Picicci described as high. Sales were up 14% for the quarter. Excluding foreign-currency impacts and early imports to mitigate tariff costs, inventory was up around 7%, he said. Tariff-related actions accounted for roughly 6 percentage points of the net inventory level.

The decision to stockpile some goods wasn’t made lightly, particularly in the current consumer environment, said Picicci. “Nothing can derail a brand elevation journey like too much inventory,” he said.

✏️ Share your thoughts: Will shoppers show up and spend this holiday season or will brands be left with excess goods? Join the conversation at the bottom of the story.

📆 Earnings

• McCormick

📈 Economic Indicators

The Federal Reserve Bank of New York releases its Survey of Consumer Expectations for September.

The U.S. Supreme Court on Monday said it will not hear a petition from BDO USA to decide the scenarios in which accounting firms could be held liable for flawed audits.

The accounting firm in May asked the high court to review a Second U.S. Circuit Court of Appeals ruling that found that investors of AmTrust Financial Services could sue BDO over its audit work for the insurance company. BDO in its petition said the rule could set a “dangerous precedent” for public-company auditors and noted that “innocent and anodyne mistakes” aren’t material to investors.

The appeals court’s decision last October marked a reversal from its opinion in August 2023 in which it said the audit report wasn’t material and upheld the dismissal of fraud claims against BDO. The appeals court’s original ruling spurred new debate within the accounting profession and among investors about whether audit reports are useful. Audit reports operate on a pass-fail model, and their language is standardized.

BDO didn’t immediately respond for comment.

—Mark Maurer

OpenAI and chip-designer Advanced Micro Devices announced a multibillion-dollar partnership to collaborate on AI data centers that will run on AMD processors, one of the most direct challenges yet to industry leader Nvidia.

Under the terms of the deal, OpenAI committed to purchasing 6 gigawatts worth of AMD’s chips, starting with the MI450 chip next year. The ChatGPT maker will buy the chips either directly or through its cloud computing partners. AMD chief Lisa Su said in an interview Sunday that the deal would result in tens of billions of dollars in new revenue for the chip company over the next half-decade.

• OpenAI Raises the Stakes for AMD’s Race to Catch Nvidia

📰 Other headlines

• Constellation Lowers Outlook Again as Pullback Among Hispanic Consumers Continues
• U.S. Warehouse Vacancies Steady as Demand Rises With Less New Space
• Bessent Picks Social Security Chief Frank Bisignano as IRS CEO
• Verizon Names Lead Director Daniel Schulman as Chief Executive
• Paramount Buys Bari Weiss’s the Free Press for $150 Million
• Inside the Bank Where Almost Every Employee Is a Gig Worker

FedEx, the Memphis, Tenn.-based shipping company, appointed Marshall Witt, former chief financial officer of IT company TD Synnex, as CFO of FedEx Freight, which the company is spinning off into its own company. Before joining TD Synnex, Witt worked for 15 years at FedEx, particularly within the FedEx Freight finance organization. The appointment rounds out the leadership team of FedEx Freight, whose spinoff is set to be completed next year, FedEx said.

—Nicholas G. Miller contributed to today’s Ledger.

In the second episode of “Leaders,” a new podcast hosted by Alan Murray from the WSJ Leadership Institute, Rolls-Royce CEO Tufan Erginbilgiç reveals how he reinvented a storied 120-year-old brand in one of the most dramatic corporate turnarounds in recent years.

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The Wall Street Journal's CFO Journal offers corporate leaders and professionals CFO analysis, advice and commentary to make informed decisions. We cover topics including corporate tax, accounting, regulation, capital markets, management and strategy.

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