The Big Picture
March’s inflation figure of 5% growth was the lowest rate in two years, as food and energy prices fell slightly. However, housing costs remain stubbornly high, which means that the Federal Reserve could be looking at another quarter-point rate hike when it meets next week.
In retail, overall sales were down 1% last month, marking the weakest results we have seen since the pandemic lockdowns in early 2020. Clothing, home goods, and appliances saw the steepest declines, though sporting goods and services experienced an uptick.
While the sales numbers were disappointing, the unemployment rate has stayed relatively consistent. What’s more, recent corporate earnings in the tech sector have come out stronger than expected, reducing some market nervousness since the recent bank failures.
Among our client stores, women’s wear saw a significant drop last month, down 9% overall from a year earlier. Women’s was most affected by the 15% decline in dress, and 20% drop in shoes.
Menswear performed somewhat better than women’s, showing a 2% gain overall, as Clothing sales continued to bring the momentum. These more formal categories, which include Suits and Sport Coats, posted a 6% gain in March, driven by special events and clients’ efforts to rebuild their office wardrobes.
From the numbers we have seen so far in April, it looks like sales are continuing to slow. Also, we’re going against the largest percentage gains of the season from last year, which could make the declines look steeper than they normally would.
Given that sales are down, and inventory levels are steadily increasing, we will need to start taking our first markdowns earlier than last year. They don’t need to be deep, just targeted at reducing rising inventory levels.
Take a close look at which areas of your business are being impacted, and what percentage of your total business they historically represent.
If you are seeing declines in key areas you need to make up for that shortfall by increasing sales in other categories and by selling full outfits. Working with customers to create a head-to-toe look may take a little more time and attention, but it’s a key strategy to get your unit transaction value up.
At the same time, you need to stay on budget and not get overbought. It’s time to get back to our merchandising essentials; the days of easy post-pandemic sales gains are over.
We expect Fall ’23 to be stronger than late Spring and Summer, especially since we are going against smaller gains from last year. Focus on getting your business in the right position to take advantage of an improvement in business later this year.
Blacks’ Bottom Line
Start developing plans to clear any extra goods immediately and review your budgets for this Fall and Spring ‘24.