Oct. ’22 Retail Report: Fall Sales Are Firm, But Supply May Complicate 2023

The Big Picture

Overall retail spending stalled last month as consumer prices continued to rise, clocking in 8.2% higher than a year ago. While sporting goods and home furnishings saw drops, online retailers and clothing stores (up 0.5%) were some of the few sectors with minor gains.

With inflation still running unchecked, the Fed is likely to continue raising rates and sending shivers through the stock market. Big box retailers are already preparing for lower consumer demand by rolling out holiday promotions early. Black Friday in October is their latest strategy.

While the broader market is flashing some warning signs, our higher-end merchants continue to do well, signaling a healthy holiday season to come.

September Sales

Among our client stores, sales stayed firm in September. Both menswear and women’s wear posted gains of around 20% over last year.

In men’s, Sportswear sales finally caught up with the momentum we have been seeing in Clothing. Sportswear landed 21% up, thanks to new fall fashions and the overshirt/shirtjacket trend. In our better menswear stores these pieces can be quite pricey — from a few hundred dollars to over $3000, making them a profitable category.

In women’s, dresses continue to lead sales — up 20% last month—followed by an 18% bump in accessories.

Holiday & Beyond

With the current sales trajectory, we still expect the holiday season to be up by single digits from last year. While some mass market merchants have started slashing prices to clear out their extra inventory, merchants in the upper part of the market should not have to be so promotional.

We’ve seen our stores’ inventory levels slowly building, however, which means that merchants need to take a close look at any cumulative negative open-to-buy (OTB) numbers. If they stretch beyond the current season you will likely have to take markdowns.
Supply 2023

With the ongoing war in Ukraine affecting energy supply and pricing across Europe, retailers who buy European goods are facing a dual crisis of higher prices and less supply. We are advising our clients to go to market early, both this fall and next spring, to try to lock in orders.

This doesn’t mean that you should overbuy, but make sure you put your orders in as soon as you can, and then negotiate the proper landing times so they will roll throughout the season.

Blacks’ Bottom Line

Your task for the next few months is to track any negative OTB, and coordinate appropriate markdowns when necessary. You do not want to be caught with extra inventory and no new merchandise as the market slows.