Lean inventory strategy and fashion retailers’ profitability: exploring the moderating effects of information technology intensity

Purpose The lean inventory strategy can be a promising sustainable practice in the fashion retail industry. However, whether this strategy always has a positive impact on a firm’s financial performance has not been clarified in previous research. Thus, managers may hesitate to invest in implementing the lean inventory strategy. The present study investigates the boundary conditions of this strategy, i.e. the conditions under which it can improve firm performance. Design/methodology/approach Secondary longitudinal data were collected from 2005 to 2019 based on a survey of Japanese Business Structures and Activities conducted by the Ministry of Economy, Trade and Industry in Japan. The sample comprised 807 observations from 57 fashion retailers operating in the country. The research hypotheses were tested using a fixed-effect method. Findings This study found that IT intensity is the boundary condition of the strategy. Specifically, the lean inventory strategy has a positive effect on fashion retail companies’ profitability only when IT intensity is not zero. Moreover, this positive performance effect is strengthened by IT intensity. Originality/value This study considered the potential sustainability benefits of the lean inventory strategy in the fashion retail industry. The findings revealed that the strategy can serve as a sustainable practice for improving firm financial and environmental performance when IT intensity is present. This study provides valuable insights for fashion retail managers who handle both financial and environmental performance.