The Big Picture
Even though inflation ticked up slightly last month, recording a 3.2% increase for the 12 months ending in July, retail sales continued to climb.
Overall sales were up 0.7% from the prior month, with non-durable categories such as clothing and sporting goods representing the most momentum. This was despite the fact that gas prices continued to increase amid summer travel. Some of this spending is connected to increased use of credit lines. Americans’ credit card debt hit $1 trillion this month, as confidence remains high.
While most economists agree that we have navigated a soft landing from pandemic shutdowns, there is still some concern about the strength of the economy amid political divisiveness. Ratings agency Fitch downgraded the U.S.’s credit rating for the first time from AAA to AA+, pointing to potentially difficult budget negotiations later this year.
Among our client stores, Menswear was up 3% overall in July, while Women’s Wear dropped by 5%. Menswear continues to be propped up by Clothing categories, such as Suits, which posted an 11% increase, and Sport Coats, which saw a 21% sales spike.
In women’s, ready-to-wear remained down, but Special Orders were up by 34%, indicating that demand is still present, especially for new, higher-end pieces. Dresses are still posting double-digit declines, but we expect this to change as we head into early fall.
Menswear Inventory Issues
One trend we are keeping an eye on is the growing amount of menswear inventory, which is about 12% over last year. This compares to a year-to-date sales increase of just 2%. Perhaps the unusual momentum behind menswear over the past two years have led to buyers’ over-exuberance. But one thing is for sure – as we head into a slowing cycle around the fall elections next year these inventory levels need to come down.
We’re not seeing the same kind of concerns among women’s wear retailers. They have managed to decrease their inventory levels by 6% from last year, with year-to-date sales down by 1%. Once again, we are seeing that we can still make money when running lean on inventory.
Looking ahead, we are facing some big numbers from last September, but it should be easy to stay even for the rest of the season.
Blacks’ Bottom Line
Start working now on reducing your inventory levels if they are out or balance, particularly before next year’s election season.