May Retail Report: Now Is the Time to Build Back Cash

The Big Picture

After a 10.7% surge in March, overall retail sales flattened in April, according to Commerce Department data. Analysts said the stagnation was not surprising given that the last economic stimulus checks were spent in March.

Furthermore, consumers can’t help but notice prices rising around them, leading to inflation concerns. Consumer prices have increased by 4.2% in the 12 months leading to April, marking the biggest increases since 2008. Along with rising prices, consumer sentiment has fallen slightly.

But analysts still believe that we will see a pickup in consumer activity in coming months, as the economy continues to recover and a greater percent of the population becomes vaccinated.

April Sales

Customers in our better menswear and women’s wear stores are more affected by overall market sentiment than stimulus checks, so our stores continued to rack up gains last month. Both our menswear and women’s wear operations made month-over month gains, with some matching or beating 2019 numbers.

Inventory issues still remain, but buyers are managing to get their hands on enough product to keep sales going.

Fall Plans

While we expect a typical summer slowdown in July and August, early fall looks like it will be strong again. We are expecting women’s wear to come in slightly lower than fall 2019, with menswear about 10% off 2019 numbers.

Inflation Adjustments

Chances are your costs are increasing due to both the sudden restart of the economy and lingering supply bottlenecks, so now is the time to increase your initial markup (IMU) where you can. This even means pulling the inventory you already have on the floor and repricing it if you have to. Just be careful that you are still in line with your competition.

The good news is that all indications show that consumers are willing to accept higher prices. We know this because the fastest selling segments we’ve seen over the last few months have been at the higher end.

The most important aspect of your business to focus on over the coming six months is generating cash flow. We know that many stores ate through their reserves during the pandemic so now is the time to rebuild capital.

Sales momentum could fall off again after the first quarter of 2022, so make the most of demand now. One great way to assess your cash flow position is to use the free profit calculator on our website.

Blacks’ Bottom Line

Focus on rebuilding your cash reserves now. Pricing, or re-pricing, inventory to account for inflation is an important part of this plan.