The Big Picture
Retail sales continued to remain strong in April, notching up 7.2%, with a 10.8% increase in apparel sales, according to MasterCard SpendingPulse figures. What’s more, the growth of in-store sales beat e-commerce by a wide margin.
Part of this demand was driven by the need to refresh warm weather wardrobes, and prepare for summer travel. This is particularly good news given that inflationary pressures remain a challenge. Inflation increased by 8.3% last month, after posting a 8.5% climb in March.
And while inflation is taking a toll on consumer confidence — the confidence index dropped slightly last month, according to the Conference Board— so far it is mainly affecting the lower end of the apparel market. We are seeing consistent demand for luxury items like jewelry, indicating the wealthier consumers have yet to be deterred by price increases. However, inflation and disappointing sales figures in some part of the economy have spooked investors, sending the Dow down over 13% so far this year. We’ll see if this unease spreads.
Among our client stores we saw an average 50% sales gain in April against last year. In men’s, suits, sport coats and sport shirts drove the biggest increases. In women’s, dresses continue to be in demand, and jackets are starting to surge. Jewelry and shoes are also doing well.
Shoppers are still rebuilding their wardrobes following the pandemic, especially work clothes, such as suits and sport coats.
And while demand remains positive for now, the trend of growing inventory levels continues. In fact, nearly 50% of our merchants said that their spring deliveries came in late, leaving them with a shorter window to sell at full price.
This is not a problem right now since they are doing more volume, but once business returns to its normal levels this could put retailers in a risky position. With a shorter sales window you are more likely to have to mark down goods, cutting into your margins.
Higher margin levels have been a silver lining coming out of the pandemic, and we don’t want to lose them. Talk to your vendor partners about clear delivery windows for fall goods to prevent late arrivals.
Right now we are planning our clients up by an average of 10% this fall against last year, as we go against stronger sales figures.
We will be adjusting these numbers in the months ahead according to the sales patterns, especially given that many economists are predicting a coming recession, likely in early 2023.
But for now, merchants should focus on the positive: dollar sales have remained steady, unemployment is low and supply chains continue to stabilize.
Blacks’ Bottom Line
Keep focused on your sales plans and don’t let your inventory exceed the plans. There could be a surprise at any turn.