Clothing stores have been slashing prices, trying to sell off their excess inventory.
Stefani Reynolds/AFP via Getty Images
Remember when we couldn’t get enough of sportswear or pajamas?
Now, the biggest burning question for clothing retailers is whether they have “excess inventory”: too many additional styles, sizes, or colors that don’t sell as well.
Levi’s, for example, ended up with too many jeans, Gap with too many shirts and hoodies, Kohl’s with fleeces and pajamas. Nike has been offering discounts on shorts, jerseys and sandals, and Adidas and Under Armor have also acknowledged their own inventory problems.
“We’ve really seen it across the board,” says Brian Ehrig, a partner in the consumer practice at consulting firm Kearney. “We’re talking tops, bottoms, sleepwear – all of those products are really having a huge glut.”
This is a story of overordering, shipping chaos, and constant pandemic shifts in shopping habits. And it ends with packed shelves, price cuts, and promises of great holiday deals.
Retailers struggle to get their orders right
In any given year, clothing stores walk a tightrope, trying to predict trends and order products months in advance. The pandemic made it more complicated. First, in the blink of an eye, the lockdowns caused millions of people to trade in their office clothes for sweatpants and house dresses. With shoppers staying home, malls emptied and storied clothing chains went bankrupt.
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Then came a shopping boom. Retailers step on the gas and order more and more. Then the rather sudden travel bonanza, in-person parties and return to the office meant that everything changed, again.
“A lot of the things that people have been using in recent years aren’t the same things that they’re using now,” says Ehrig.
Despite everything, shipments from Asia have suffered many interruptions. Remember the delays and shortages last winter? Eager to avoid a repeat, many stores decided not to take a chance on this year’s holiday shopping demand, placing those orders even earlier than usual.
“Nobody wants to miss out on the holiday season, they really need that product,” says Cristina Fernández, a senior research analyst at Telsey Advisory Group. “But now you have it, and you have too much. So that’s the dilemma.”
For example, Nike CFO Matt Friend said the company had “a few seasons coming to market at the same time” as delayed shipments for the spring, summer and fall seasons arrived too late just as orders of the parties began to arrive earlier.
Not a necessity, clothing has seen declining prices.
Meanwhile, inflation has led more shoppers to think long and hard about how much they’re willing to spend on clothes.
“It added up to a confluence of events,” Fernandez says, “retailers got behind on inventory, orders that (they) didn’t really need, and then consumer demand slowed.”
Target, Kohl’s and other retailers say higher food and gas prices are discouraging people from discretionary purchases, since clothing is rarely considered a necessity.
Less demand means less inflation: Clothing prices rose less than other goods, just 4 percent more than a year ago, and have actually fallen for the past two months. Spending at clothing stores rose 3 percent in October compared to last year and is expected to slow over the holidays.
“I think what really caught (retailers) was the pushback and the change in consumer buying habits,” says Adam Davis, who works with department stores and other retailers as CEO of Wells Fargo.
Most companies, including Gap and J.Crew, have addressed their inventory problems by cutting prices and staging sales. Some are packaging more perennial items, like generic T-shirts that they might try to sell next year. Many clothes also head to discount chains like TJMaxx or Ross.
Does this mean general holiday discounts? Davis, Ehrig and Fernández say yes, most likely. Will people decide that they really want more clothes? That’s another thing.
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