A customer buys shirts at an American Eagle Outfitters store in San Francisco.
David Paul Morris | Bloomberg | Getty Images
Excess inventory has accumulated in many retailers’ warehouses and stores. But buyers always pay more when they freshen up the closet.
Clothing prices increased by 0.8% in June from May, and 5.2% year over year, according to the Bureau of Labor Statistics consumer price index on Wednesday. Overall, the inflation gauge, which includes everyday items such as food and gasoline, rose 9.1% more than expected from a year earlier.
Clothing trends are another mixed metric as economists and industry watchers try to gauge the strength of consumer spending and the US economy. In recent weeks, many leading companies and investors have warned of a recession. Retailers including Target, Gap and Walmart have announced plans for more markdowns to get rid of unwanted merchandise. The movements were to be deflationary.
Still, apparel sales and prices — at least so far — are above last year’s levels. The labor market also remains robust: the June jobs report defied fears of recession, with the jobless rate remaining unchanged and payrolls exceeding expectations.
“It’s all about experience,” said Kristen Classi-Zummo, industry analyst who covers fashion apparel for The NPD Group. “A return to release is really what’s driving apparel growth. This experiential re-emergence that we haven’t fully seen in the past year.”
Some retailers have also reported it. Levi Strauss & Co. revenue increased 15% year over year for the quarter ending May 29. Still, its value brands, which generate a small portion of the company’s overall sales and are sold by Walmart, Target and Amazon, saw mid-single digits down from a year ago, the report said. CEO Chip Bergh.
Walmart also saw a split in its clothing category. It sharply discounted some of its apparel in the fiscal first quarter as buyers retreated from discretionary goods. Still, the company’s head of merchandising, Charles Redfield, told CNBC in early June that the big-box chain couldn’t keep up with demand for its more edgy, higher-priced brands, such as designer dresses. summer and the highs of Scoop.
An abundance of bad things
U.S. apparel sales were up 5% year-over-year for the January-May period, and 13% from the same period in 2019 before the pandemic, according to NPD, a company market studies.
Formal dress, in particular, has taken over when Americans go to weddings or spend more time in the office, she said. When shopping for these occasions, some consumers are willing to purchase items that are not on sale.
Sales of women’s dresses rose 42% year over year from January to May, according to NPD. It was also 14% more than in 2019, before the pandemic.
This shift in consumer preference hurt retailers who sourced the wrong products. Gap, which announced this week that CEO Sonia Syngal quit, saying in her latest earnings report that customers didn’t want the company’s many fleece hoodies and activewear. There was also a sizing mismatch from shoppers as he pushed for plus size.
Abercrombie & Fitch and American Eagle Outfitters both reported sharp increases in inventory levels, up 45% and 46%, respectively, from a year ago, due to a mix of unsold items and easing supply chain delays.
Typically, an abundance of inventory triggers higher levels of sales promotions — something that’s already playing out at Walmart and Target, not just in apparel, but also in other categories such as homewares. June retail sales figures, another closely watched economic indicator, will be released Friday by the Commerce Department.
Clothing shows signs of decline, however. As apparel sales rise in dollar terms, units are down about 8% from the same period a year ago, according to NPD, which could lead to lower sales over time.
A survey by equity research firm Jefferies in June found that about 35% of consumers plan to buy or are currently buying fewer clothes.
There was a divide among consumers in the survey, too. Those who earn $100,000 or more a year said they currently plan or spend less on services, such as restaurants and travel. Low-income people were more likely to report that they were already reducing their purchases of clothing and groceries.
A year ago, apparel retailers had several factors that ended up working in their favor. Americans got extra dollars from stimulus checks. Some were still hesitant to spend those dollars on larger trips, restaurants or other services due to Covid concerns. The supply chain is booming with limited inventory levels.
Retailers had a chance to “reset” and break a “vicious sales cycle,” Classi-Zummo said. All of this has contributed to retailers selling more clothes at full price.
Now, she said, clothing retailers have had to pass on more of their costs — such as higher prices for the raw materials used to make clothes or the gas needed to transport them. This drove up the prices of shirts, dresses and more.
High-income shoppers help drive apparel sales because they still have the means and willingness to pay for higher-priced brands and top-selling apparel. That may partly explain the inflated clothing prices, Classi-Zummo said.
For example, sales of swimwear declined overall after surging last year. But this year, the fastest growing segment is $100+ swimwear. Swimwear under $70 drove the year-over-year decline, NPD found.
“There’s a bit of a story of two consumers,” she said. “A low-income domestic consumer might think twice about buying an item of clothing, whether it’s on sale or not. A high-income consumer hasn’t been affected yet – they’re still buying at a higher rate. high. The luxury market has always been on fire.”