The Big Picture
We continue to get a confusing mix of economic numbers heading into fall. Overall July retail sales slipped 1.1%, more than expected, but not too surprising given that we have seen four solid months of demand leading into the traditional summer slump. At the same time, unemployment claims hit a 17-month low last week, indicting more robust job growth.
However, there seems to be no doubt at this point that the rise in Covid cases due to the delta variant, and increasing inflation, are creating more caution in the market. The stock market has been swinging up and down, while consumer confidence fell to its lowest level in a decade in early August, according to the University of Michigan.
While the overall retail environment saw a slowdown last month, a majority of our apparel merchants continued to beat their sales plans compared to 2019. That said, the number of stores beating plan did wane from our May and June numbers.
We’re not concerned about a drop-off quite yet, but we have been keeping a close eye on how new fall goods are performing as they come in. So far, demand is still there, and both men’s and women’s wear are performing well. (Usually if there is a downturn, men’s drops off first.)
In more good news, supply chains are loosening up and product is easier to come by in general. We are still waiting for some European vendors to come back from their summer vacations, but those goods should be available soon.
With supply increasing, vendors may be more eager to ship goods right away. Don’t allow too many deliveries up-front since you will not be able to adjust your inventory if sales suddenly slump. Keep applying the “hold and release” method for receiving deliveries.
Spring ‘22 Strategy
With fall goods already landing we are looking forward to spring of next year. So far we are planning merchants even or slightly down from spring of 2021, when pent-up demand caused a significant upswing.
Stores that made a slower recovery last year could see spring sales flat, or even slightly up, but stores that really beat their 2019 numbers in SP’21 might see a year-over-year decrease by up to 5%. Either way, it’s important that we keep our inventories lean so we can make small adjustments as the demand cycle fluctuates. The broader economic and pandemic landscape remains uncertain, so we need to stay cautious.
Fortunately, merchants report that there is enough newness in the market to keep shoppers interested. We are not seeing any big changes in the trend lines, but an evolution of the styles that we saw earlier this year, with decent sales expected across all categories.
One trend we are watching closely is the performance of activewear. Many stores added this category during the pandemic, selling mostly “core” merchandise. Now merchants need to flow a lot newness (such as seasonal colors) to support the trend.
Blacks’ Bottom Line
While there are concerns over softening demand, so far the market is resilient. Keep using the “hold and release” method to ensure that you are only landing goods you can sell at full price, or close to it.