The Big Picture
Retail sales continued to tick up in June, despite the 9.1% increase in inflation recorded over the same period. Total retail sales, excluding autos and gas, rose 6.1% over a year ago, with department stores reporting a 8.6% gain, according to MasterCard Spending Pulse.
Jewelry, travel, and luxury categories did well, indicating that inflationary concerns are not affecting all segments of the market. However, market uncertainty has taken its toll on consumer confidence, which fell by 4.5 points last month. Pundits are now predicting slower growth for the second half of the year, which we have already been planning for.
Among our client stores June was a strong month overall. We saw an average 14% gain in menswear, with women’s wear posting a 7% increase. Clothing categories continued to drive menswear sales, as shoppers picked up suits and formalwear for summer events.
In women’s, we saw even interest in both ready-to-wear and accessories. Some of these gains were driven by travel-related shopping, which helped merchants avoid the typical summer slump. And so far in July we are hearing that sales remain steady.
That said, looking toward fall we know that a slowdown is coming. As we mentioned last month, inventory levels are starting to rise, and the sales gains are getting smaller as we go against stronger months last year. And, in terms of fashion we are seeing a disconnect at least in the high end of the market. Designers’ exaggerated and voluminous styles don’t appear to be resonating with consumers who still want a slimmer fit, after two years at home in loose comfort clothes.
Another factor to keep in mind as we head into 2023 is the growing distance between when orders need to be made, and when consumers actually buy the product. In a survey we did with dozens of brands and retailers in late May in conjunction with the Society trade show, some brands pointed out that they now need to make their orders a year out for them to be fulfilled on time.
With such a large gap between ordering products and getting them in the stores our risks grow. Will the style and fit of apparel we ordered over a year ago fit the demands of the moment? Will there be problems in the supply chain along the way?
In summary, we are seeing a lot of uncertainty in the market, which means it’s time to get cautious even if you’re still running on the sugar high of two years of great sales.
Trim your forecasts for fall and 2023 if you haven’t already, and keep clear communications with your vendors around their timelines and delivery windows. Sales have shifted to mostly in-season purchases, meaning you don’t need as much product upfront.
Blacks’ Bottom Line
Enjoy the summer gains, and bank as much profit as you can now to insulate you for when sales slow.