The Big Picture
Despite climbing inflation and strong spending over the holiday season, consumers continued to shop through the normally slow month of January. Overall retail sales increased by 3.8% from December, posting the largest one-month increase since March 2021, when stimulus checks were adding to consumers’ disposable incomes.
Department stores did particularly well last month, seeing a 9.2% increase, even amid a 9.7% jump in inflation from a year earlier, according to Labor Department figures.
Now merchants are watching to see if the revenue will keep flowing into spring, or if consumers will finally take a breather. We’re keeping our eyes on the current conflict in Ukraine, which threatens to increase energy prices even more. If energy and other costs continue to rise at a fast clip, and the stock market wobbles (as it is currently), consumer confidence will likely be impacted.
us for a while, but so is the opportunity to pull in more sales gains.
Like in the broader market, our better retailers recorded a very strong start to the year, even in the face of spotty deliveries. We recorded a whopping 73% sales increase among our client stores in January, using far fewer markdowns, keeping margins higher.
Anything new is selling well, across categories. Menswear sales are still keeping up with women’s wear — which has been an interesting pandemic twist — since women’s generally tracks ahead.
In men’s, we are seeing particularly strong performance in jackets, sweaters (cardigans specifically), and sportcoats, along with any new sport shirt deliveries.
In womens, new shoes and bags are selling well, along with evening dresses for special events. New collections are also getting early traction. Even though all the U.S. states have opened up and mobility is on the rise, consumers are still making up for the spending that they couldn’t do through 2020 and into early 2021. That’s why we expect business to pick up as more spring merchandise flows in. That said, each region is different, so if you start to miss early spring sales plans, push back on late deliveries.
For now, we are sticking to our plan of a 10% increase for the second quarter compared to last year. As usual, warmer resort locations will lead the way.
While demand is not an issue for many, rising prices are, and merchants should expect this to affect both their open-to-buy and initial markups. Make sure your budgets reflect the inflation that we have already seen, and the increases that are sure to come due to rising energy costs and, as a knock-on, more expensive transportation.
One strategy is to build more margin into your initial markups for spring and fall, to give you some cushion. So far, customers have absorbed the higher prices, but it is still a delicate balance. Work with your vendors to make the necessary adjustments to address inflation without huge pricing jumps.
Blacks’ Bottom Line
Review your initial markups to avoid losing margin as prices rise.