The Big Picture
Although the near-term outlook remains positive, the U.S. Federal Reserve says that economic growth has slowed recently, due to higher prices, supply chain issues, and a worker shortage.
But on the bright side, consumer spending remains firm. This was reflected in an unexpected rise in retail sales for September, which was up by 0.8%, beating a forecasted bump of 0.5%. Compared to last year, sales were up 15.6%, despite the expiration of many government pandemic-related benefits.
These macro sales trends were reflected in our client stores last month, where we saw unabated demand, even amid product shortages. Both menswear and women’s wear rocketed past their year-ago performance: our men’s operations posted an average 81% gain over last September, while women’s increased by 46%.
Menswear did well even though it’s facing more product shortages in general, especially around basics, such as stock suits, and dress shirts. Seasonal items, on the other hand, are coming in a little late, but still available.
Women’s wear doesn’t rely on stock products as much, so these operations were less affected. Across the board, we are still seeing minimal markdowns, allowing merchants to hold onto healthy margins.
At this point in the season, holiday plans are set, and we are just waiting for the next couple of months to play out. Our forecast of a blockbuster holiday season remains in place; the trick now is planning for next year.
Here’s what we know, and what we don’t know. First, we know that 10 to 12 months of continuous demand will likely slow in the first quarter of 2022. (We are going up against some weak numbers for January and February, which may provide a year-over-year boost, but after that we will likely see a slowdown.)
What we don’t know is exactly when it will slow, and if it will be a hard stop (if there is an economic cause), or a gentle tapering off.
In either case, banking the extra profit you’re making now is key, as well as keeping disciplined about staying on your inventory plans.
In terms of inventory levels, we are already running lean by necessity, so we don’t recommend cutting back for next year. Instead, rely on our “hold and release” strategy for receiving orders to make sure that the demand is there before you land them.
Unfortunately, staff shortages will probably still be with us. Now may be the time to investigate technologies that can help you streamline tasks, and better engage with customers online.
Blacks Bottom Line
Ride the profit wave now. Next year is set to slow, so don’t forget the hard-learned lessons and discipline you’ve cultivated over the last 20 months.