Luxury Apparel - October 2008
open in pdf format
Table of Contents
The Big Picture
The U.S. economy continued in a state of uncertainty in October, despite the $750 billion bank bailout bill. The Dow Jones swung wildly on contradictory news that home sales were up in September, yet consumer confidence in October fell to a record low.
Now the Fed is hoping that a half-point interest rate cut will bring some relief to the tight credit markets. It appears that the financial markets could be reaching a stabilization point, but the retail market is still being hit hard.
September Drops
Sales of menswear plummeted 25% in September, while women’s dropped 8%. In Men’s, Clothing and Special Order took the hardest hits, falling 31% and 47%, respectively. Meanwhile, women’s Ready-To-Wear slid 11%, and Women’s Accessories made an 11% gain. Dresses continue to carry momentum, although sales have fallen off from the previous two months.
This means that even our strongest stores are being affected by the economic climate. We expect this downward trend to continue through the first-half of November. After that, we could see resurgence as consumers start their holiday shopping in earnest.
Holiday Strategies
Faced with this challenging climate, retailers must get serious about paring down their on-orders and increasing their in season open-to-buy so they can flow fresh, trend merchandise throughout the season, giving customers a reason to buy.
Make sure that you’ve planned down sales and be prepared to take markdowns earlier in the season. The last thing you want is to be stuck with excess inventory come January 1. Put the merchandise you have the most of up front, and design a sales strategy to clear it out. Based on our trend numbers, this means you need to unload as much Clothing and RTW as possible, since demand is falling.
Some of our retailers have also cut their on-orders for Spring/Summer in hopes of buying off-priced merchandise in season. If this is your strategy, make sure you can execute this plan early and have plenty of open credit. There may be a lack of off-priced goods in the market since so many merchants will be looking for them. In addition, vendors could cut back on their manufacturing.
One bright spot is that the dollar has strengthened over the last couple of months, making European product more affordable. This means that merchants have the opportunity to improve their margins. We’ll be interested to see how prices are affected at the upcoming New York men’s shows.
For now, it’s imperative that you regularly review and adjust your sales plans and cut back on any unnecessary expenses. The holidays should provide a little relief, so hang in there.
Blacks Bottom Line
Concentrate on margin and generating gross profit dollars.
|
