Feb. ’23 Retail Report: Jan. Sales Jump Adds to Uncertainty

The Big Picture

Recent U.S. economic indicators point to continued strength in spending and employment, and slowly cooling inflation. However, some fear that the economy is still running a little too hot, which could lead to further interest rate hikes.

Inflation came in at 6.4% in January compared to a year earlier, while consumer prices increased by 0.5%. Overall retail sales were up by 3% last month, compared to 2.5% decline in December. This jump, in a normally slow month characterized by discount shopping, was unusual. Even department stores experienced a significant uptick of 17.5% over January ‘22.

It appears that we still haven’t returned to a “normal” sales cycle based on historical patterns. This means that merchants have to keep on their toes to be able to respond to an unpredictable demand cycle.

2023’s Strong Start

Sales were brisk in our client stores last month, with menswear posting an 18% gain overall, and women’s wear showing a 21% increase.

Men’s stores saw even demand for both sportswear and clothing categories, while women’s was mostly driven by dresses and special order. Last month was the first in several months where women’s wear outperformed menswear. (More on that in the story below.)

So far in February our client stores have continued to see gains, but not as strong as last month. For now, we are sticking with our spring forecast of single-digit increases over last year, since we believe that consumer demand will eventually come down.

Refill Opportunities & Fall Plans

Since the first part of the year has exceeded expectations, we will be increasing open-to-buy (OTB) plans for the months ahead, which means that merchants should look for what’s selling well, since they should have some extra funds to restock popular items. Right now our clients are telling us that anything new sells, but it’s wise to dive into the sell-thru rates for specific vendors and styles.

You’ll also want to think about keeping margin rates up as we go against stronger numbers from last year. There may be an opportunity to grab some off-price merchandise since there appears to be an inventory glut.

When it comes to fall planning, review your trends from the last season to prepare for your Fall ’23 buy. Past trends often tell us about the future. Right now, we are planning Fall ’23 up by mid-to-high single digits.

Blacks’ Bottom Line
Take a close look at your sell-thru rates over the last couple of months and use any OTB you held back at the start of the season to restock bestsellers.