A customer shops for T-shirts at an American Eagle Outfitters store in San Francisco.
David Pablo Morris | Mayor Bloomberg | fake images
Excess inventory has accumulated in the warehouses and stores of many retailers. But buyers continue to pay more as they upgrade the closet.
Clothing prices rose 0.8% in June compared to May and 5.2% year over year, according to the Bureau of Labor Statistics Consumer Price Index on Wednesday. Overall, the inflation gauge, which includes everyday items like food and gasoline, rose 9.1% more than expected from a year earlier.
Clothing trends are another mixed metric, as economists and industry watchers try to gauge the strength of the American consumer and economy. In recent weeks, many leading companies and investors have warned of a recession. Retailers including Target, Gap and Walmart have announced plans for more markdowns to get rid of unwanted merchandise. The movements were expected to be deflationary.
However, clothing sales and prices, at least so far, are exceeding last year’s levels. The labor market also remains strong: June’s jobs report defied recession fears as the jobless rate remained unchanged and payrolls beat expectations.
“It’s about the experience,” said Kristen Classi-Zummo, an industry analyst covering fashion apparel for The NPD Group. “Getting back out there is really what’s driving the growth of apparel. This experiential resurgence that we still didn’t fully see last year.”
Some retailers have also reported it. Levi Strauss & Co. revenue grew 15% year over year for the quarter ended May 29. However, its value brands, which generate a small amount of the company’s overall sales and are sold by Walmart, Target and Amazon, posted an average double-digit decline from a year ago, CEO Chip Bergh said.
Walmart also saw a split in its clothing category. It aggressively marked down some of its clothing in the fiscal first quarter as shoppers pulled out of discretionary merchandise. However, the company’s chief merchandising officer, Charles Redfield, told CNBC in early June that the department store chain was unable to meet demand for its higher-priced, cutting-edge brands, such as sundresses and crop tops. Scoop.
An abundance of bad things
Clothing sales in the US grew 5% year-over-year during the January-May period, and 13% compared to the same period before the 2019 pandemic, according to NPD, a research firm of market.
Formal wear, in particular, has picked up again as Americans head to weddings or spend more time at the office, he said. When shopping for such occasions, some consumers are willing to purchase items that are not on sale.
Sales of women’s dresses grew 42% year over year from January to May, according to NPD. That was also 14% higher than in 2019, before the pandemic.
That shift in consumer preference has hurt retailers who have stocked up on the wrong things. Gap, which announced this week that Chief Executive Officer Sonia Syngal has resigned, said in its most recent earnings report that customers did not want the company’s many fleece hoodies and sportswear. It also had a discrepancy in the size of buyers, as it made a push towards plus sizes.
Abercrombie & Fitch and American Eagle Outfitters reported sharp increases in inventory levels, up 45% and 46%, respectively, from a year ago due to a combination of unsold items and supply chain delays.
Larger amounts of inventory typically lead to higher levels of sales promotions, something that is already happening at Walmart and Target, not only in clothing, but also in other categories, such as home goods. Retail sales figures for June, another closely watched economic indicator, will be reported by the Commerce Department on Friday.
The clothes are showing some signs of a setback, however. As clothing sales rise in dollar terms, units are down about 8% compared to the same period a year ago, according to NPD, something that could reduce sales over time.
A survey by stock research firm Jefferies in June found that about 35% of consumers plan to or are currently buying fewer clothes.
There was also a split among consumers in the survey. Those earning $100,000 or more a year said they planned or spent less on services, such as restaurants and travel. Those with lower incomes were more likely to report that they were already cutting back on clothes and groceries.
‘A Tale of Two Consumers’
A year ago, clothing retailers had several factors that ended up working in their favor. Americans had extra dollars from stimulus checks. Some were still wary of spending those dollars on larger trips, dining out or other services due to Covid concerns. The supply chain growls with limited inventory levels.
Retailers had a chance to “reset” and break a “vicious sales cycle,” Classi-Zummo said. All of that helped retailers sell more clothes at full price.
Now, he said, clothing retailers have had to pass on more of their costs, such as higher prices for the raw materials used to make clothes or the gas needed to transport them. That has pushed up the prices of shirts, dresses and more.
Higher-income shoppers are helping drive clothing sales as they still have the means and willingness to pay for more expensive brands and full-price clothing. That may partially explain inflated clothing prices, Classi-Zummo said.
For example, swimwear sales have generally declined after rising last year. But this year, the fastest growing segment is swimwear priced at $100 or more. Swimsuits priced below $70 are driving the year-over-year drop, NPD found.
“There’s kind of a tale of two consumers,” he said. “A low-income family consumer might be thinking twice about buying clothing, whether it’s on sale or not. A higher-income consumer hasn’t been affected yet, they’re still shopping at a higher rate. It’s on fire.” .”
—CNBC’s Lauren Thomas contributed to this report
Source: www.cnbc.com