Holiday Sales Rebound
The Big Picture
While retail sales started to slow in October and November, consumers were determined to have a merry holiday season. Total retail sales over both Black Friday weekend and the week leading up to Christmas beat records. And in the period between Nov. 1st and Dec. 24th sales jumped 7.6% overall compared to last year, according to MasterCard data. Online sales saw the biggest gains, but apparel showed a 4.4% increase.
There is also good news on the inflation front, with prices increasing by an average of 5.5% in the 12 months through November, which was the slowest rate in 13 months. Fed watchers are hoping that the lower inflation numbers will keep the board from implementing more aggressive rate hikes going forward.
After a decrease in October we saw a mixed bag of sales in November, with menswear coming in flat and women’s wear dipping by 2% overall. However, sales picked up earlier this month, giving us a positive end to the holiday season.
Our focus now is on clearing out the excess inventory that has been building for the last several months, and preparing for a flat first quarter of 2023.
Blacks’ Bottom Line
It’s time to double down on your disciplined inventory practices, and to make sure that you do not exceed your open-to-buy plans by even 30 days.
Planning for 2023
With the holiday season a wrap, we now face a year of uncertainty. While economists debate over if we will have a recession or not, one thing is for sure: the market is cooling and it is time to make a solid plan for 2023. Let’s start with what we know:
1) We are going against strong Q1 numbers
Although there was a tapering off of sales in the wider market during the first quarter of this year, due to an Omicron surge, our retailers in the better to luxury end of the market did incredibly well. In fact, they posted some of the strongest gains we saw over the last year with January sales up by an average of 74%, February sales up by 88%, and March sales up by 60%.
As we face the first quarter of 2023 it will be challenging to go up against these numbers. Currently we are planning the quarter flat, but take a look at your own numbers to make a reasonable assessment on where you may be compared to last year.
2) You will probably need to go to market early
With supply lines still getting tangled by the energy crisis in Europe, merchants who sell European goods will need to be proactive about getting their orders in as early as possible. This does not mean, however, that you should land the goods early. You want to keep them flowing in along your projected sales curve. The last thing you want is a lot of inventory when traffic is slow.
3) Prices will be higher
We’ve already seen some big price jumps, particularly in the better part of the market. This means that if you open-to-buy stays the same as this year you will have fewer units to work with. You need to make smart decisions about how to present these lines with fewer sizes and colors.
Another issue we are seeing with pricing is that items are not just getting a little more expensive, but they are getting a lot more pricey, even jumping price lines. For instance, if the customer is considering buying a $1,600 suit but the price has risen to $1,800, they are still in the psychological barrier of $2,000 and there will be less resistance.
But if this item jumps to $2,300 now you are in a new price line of $2,000-2,500, which can be much more difficult for the customer to adjust to. This has as much to do with their psychological comfort level as it does their budget, so it can be a delicate situation to manage.
4) The menswear surge has finally slowed
Menswear has done incredibly well over the last 18 months, especially in the Suit and Clothing categories. But our November numbers show that this has finally cooled, and it will be a while before men need to replenish these wardrobes. Expect a more normal sales cycle for the year ahead, with women’s wear sales outpacing men’s by a few percentage points.
5) We need new trends
Just as sales are slowing we are missing one of the key elements to get customers back into our stores: new trends and unique products. Even the shirt/jacket trend has died down, and many products look the same despite their price tags. This will make the buyers’ job of finding “wow” items even more difficult, but this is what we have to do. Consider going to more shows— or different shows —than you normally visit to try to find these special items.
While all of this may sound daunting, seasoned merchants know that we enter every year without a crystal ball. It is our discipline and best practices that will get us through any market swings. If you need help crunching the numbers and producing a strong and accurate plan for 2023, Blacks is here to help.