The Big Picture
After two months of gains, consumers slowed their spending in May. Overall retail sales were down 1.3% as shoppers switched from goods to services, such as travel and eating out. Meanwhile, inflation continues to tick up, reaching a 5% increase in May, the highest since 2008. This is likely affecting consumer sentiment, perhaps making some more hesitant when it comes to spending.
The Fed says that the rise in inflation is just “temporary,” but it has expanded its outlook, saying it could last 6 to 9 months; earlier the Fed predicted it would last just a few months. While we will have wait to see the longer effects, in the short term, it’s causing higher costs for our merchants, and higher prices for consumers.
While sales dipped in the wider market last month, our better menswear and women’s wear merchants continued to see gains.
Women’s wear sales outpaced men’s, but they are still both showing growth, particularly in work casual categories, and accessories. This reflects a return to the office for around 30% of the U.S. working population.
We saw demand for sport shirts, and five-pocket pants from men, and denim and dresses from women.
Since the demand is still there, merchants are pushing off markdowns at least 30 days – from late June to late July. While this is making for an unusual summer, we expect demand spikes to return closer to pre-2020 levels by fall. For now, we recommend staying in the promotional 10% to 20% markdown range when you do decide to discount.
As we head into the cooler months we expect work casual categories to continue to be growth centers. In particular, we expect demand for sport coats and shirt jackets for men— both of which work great as work casual wear. In women’s, dresses will be paired with jackets and boots.
Even men’s Clothing categories are seeing a bit of a comeback. Some demand is related to postponed weddings that are now taking place, but we’re also seeing some men buying multiple suits to go back to the office.
This means we will likely see a dip in these categories this fall since closets are already being filled. And in many cases, Clothing shoppers haven’t even had a chance to wear their new wardrobes yet, since they haven’t returned to the office full time.
It’s worth remembering that we are in a very unique period where we are seeing sustained demand over seven or eight months. Do your best to plan for higher sell-through rates, but don’t get over inventoried. Stick with your inventory plans.
Inventory should become more available later this year, but you still want to run lean to keep your turn rates up, as well as your margin. Now is the time to build back the cash you relied on to get through last year.
Blacks Bottom Line
Take advantage of the sustained surge by monitoring your sell-through rates and restocking where you see the most demand.
Want to get the Blacks Retail Report sent directly to your inbox each month? Sign up here!