The Big Picture
Total retail sales grew 8.4% in March over last year, and 18% compared to pre-pandemic 2019, with travel and services making the biggest comebacks, according to Mastercard Spending Pulse.
Still, luxury goods and apparel continue to rack up gains, posting increases of 27% and 16%, respectively.
It’s worth noting, however, that inflation is adding to these sales increases in dollar terms, since prices have risen. (We have seen higher prices, thus higher sales for a while now.)
While inflation has certainly affected the markets and consumers’ spending power, it has yet to take a big toll on consumer sentiment, which rose in early April, according to the University of Michigan’s Consumer Sentiment Index (MCSI). While there are still “significant sources of economic uncertainty” factors like stabilizing oil prices and a strong labor market are keeping shoppers relatively optimistic, the MCSI report says.
Sales trends so far this April have reflected this optimism at our client stores, in what will likely be the 14th straight month of gains.
Early Spring Trends
Our merchants posted substantial growth in March, with menswear up 72% over a year ago, and women’s wear climbing 47%. This is even more impressive given that many of our clients posted increases in 2021 over 2019.
Popular sellers in menswear included Clothing, Sport Coats, Furnishing and Dress Shirts (often related to weddings), as well as sportswear favorites, such as Knits and Sport Shirts.
In women’s, Ready-to-Wear, Jackets and Dresses all came out strong. And so far in April, we have seen similar gains to last month, in terms of percentages.
Watch the “Wedge”
One thing that retailers should keep their eyes on, however, is the growing amount of on-hand Inventory compared to planned inventory. We call this the “wedge”, and it has been growing each month this year. In almost all cases if this situation is left unchecked it will lead to a margin spill.
Remember one of the lessons we learned during the pandemic: tighter inventories and lower markdowns mean higher margins. Watch the Wedge.
We don’t want to lose the momentum we’ve made in selling full-priced goods amid such strong consumer demand. Once we tiptoe into markdown territory it could reset consumer expectations, leading to more frequent or deeper cuts in margin.
The first step to avoid this situation is to check on your balance of on-orders. We are at the end of the receiving season and we’re already hearing about past due on-orders slipping in the back door. Don’t allow your negative accumulated open-to-buy to reach further than June, or you will be trapped into taking unprofitable markdowns.
As we move into the summer months, make sure that you are sticking closely to your fall plans. You need to order enough upfront to avoid potential supply chain issues, but not so much that you are adding to your excess inventory. The current sales momentum will slow.
Blacks’ Bottom Line
Don’t forget the hard learned lessons of the past two years. Focus on accumulating margin dollars.
