June Retail Report – Gearing Up For Fall

The Big Picture
In further proof of a slowdown, consumer spending was flat in May after a 0.3% decrease in April. Ripple effects from the Japanese disaster and rising oil prices contributed to the economic weakness in the first half of the year.

However, analysts are saying that these influences are now passing and expect growth in the second half of 2011. In a bit of good news, income growth is outpacing spending and the savings rate has gone up for the first time in two and a half years.

As we look toward fall, we expect overall sales to remain positive, posting single-digit gains.

Summer Wrap-up
Early indications are that June sales have been mixed with markdowns at similar levels to last year. Surprisingly, many retailers marked down a little later than usual, indicating that merchants felt that the consumer sentiment was holding steady.

May sales were positive overall, but menswear took a hit, especially dress wear. Suits, jackets, and neckwear all took a dive. Jeans made a robust comeback, however, showing a 35% gain over last year. Sports shirts also fared well, with a 9% gain.

In women’s wear, dresses and accessories came in strong, showing gains of 19% and 28%, respectively. This is not too surprising considering that these two categories have become summer staples. (For more in-depth trends, see our Trends by Class page.)

Now that July and August are upon us, we expect sales to slow as consumers wait for fall. Early fall collections are starting to sell, giving us a good indication that we will see a positive season.

Spring Concerns
While retailers seem to have weathered external shocks so far, we are concerned about spring 2012. Market prices have gone up 10% to 30% across the board due to increased petroleum and raw material costs. Unless the economy in general revs up, we are unlikely to see a third consecutive gain in spring sales since the recession.

What’s more, we don’t have any real hot designers driving trends given that we have lost a lot of luminaries over the last few years. We can only hope that some fresh new talent will step up and take their places.

Blacks Bottom Line
Focus on fall sales and making sure you’re prepared for SP’12 by re-examining your plans and adjusting them downward if necessary.