The Big Picture
Despite being in the normally slow summer month, both retail sales and the U.S. economy are showing signs of recovery. Overall retail sales increased by 0.6% in June, according to the National Retail Federation. The NRF signaled that there is still strong demand for goods, even though some consumers have shifted their spending to services as providers have opened up.
With consumption high, Bank of America predicts that U.S. GDP will grow by 6.5% this year, followed by a 5.5% growth rate next year. This comes after the dismal 3.5% dip last year.
But while the top-level 2021 numbers look good, some parts of the economy are flashing warning signs. Jobless claims took an unexpected uptick last week, and many Covid-related stimulus programs, such as eviction moratoriums and enhanced unemployment benefits, are set to expire.
At the same time, we are seeing climbing Covid cases each day due to the Delta variant. All of these factors could dampen consumer confidence and potentially lead to ore shutdowns, so we will be keeping a close eye on how the retail landscape in the months ahead.
July Sales Surprise
In our better apparel stores we have seen four months of continuous demand, which is highly unusual. July sales continued to tick up in both menswear and women’s wear. We’re seeing sales across the board, including a resurgence in clothing categories in Men’s and continued demand for dresses in Women’s.
So far our retailers are taking only light markdowns, and some are taking none at all, which is also unusual for this part of the summer season. Soon, summer sales will merge with early fall, where we expect demand to continue.
Early Fall Strategy
In the months ahead the most important factor is landing new merchandise in a small, steady stream. We know that sales will ebb before holiday, but exactly when depends on consumer sentiment, and whether a third Covid wave puts the breaks on economic activity.
For now, we recommend that you look closely at your 90-day sales trends and compare them to 2019.
So, for instance, if you have been running 10% above your 2019 trend lines for June and July, and then fall to a 6% gain in August you will know that the sales trend is slowing. Then you can adjust your receipt plan going forward to ensure you are not overbought.
We still expect holiday sales to be strong, as consumers make up for a missed holiday season last year. Now that people can gather they are going to want to splurge on gifts to make the season festive. This will also be a great time to bring holiday joy back into your stores, so start planning a series of small events now.
Blacks’ Bottom Line
Prepare for changes in the sales curve by monitoring your 90-day trends against 2019.