NEW YORK — Cooler temperatures and gift cards may have helped apparel sales in January, but the sector remains under pressure from other product categories such as home goods and electronics.
According to consumer expenditure data from the Bureau of Economic Analysis, a division of the U.S. Department of Commerce, spending on clothes and shoes jumped 1.8 percent from the third quarter to the fourth quarter of 2006. This compares with a growth rate of 3.4 percent for furniture and household equipment, which includes electronics.
On a year-over-year basis, the pace of consumer spending on home goods and electronics versus apparel was even greater. Fourth-quarter spending on apparel and shoes rose 4.3 percent year over year while spending on home goods and electronics leaped 12 percent.
So far during the first quarter of this year, apparel sales have shown some strength. January same-store sales for department stores rose 6.5 percent on average, and analysts cited a positive reaction by consumers to “fashion-right” apparel and accessories.
Some of the top gainers in same-store sales in the channel were Saks Fifth Avenue Enterprises, Nordstrom and Neiman Marcus, which posted gains of 11.4 percent, 11.1 percent and 11.3 percent, respectively.
In the specialty apparel channel, the gains were not as strong. Of the specialty companies tracked by WWD, the average increase was 2.2 percent, which compares with 8.8 percent in the same month last year. Overall, though, results were better than expected.
Goldman Sachs analyst Margaret Mager said in a post-comps report last Friday that the Goldman Sachs Retail Composite Index gained 3 percent in January, “above our 1.3 percent estimate, helped by results at the Gap, where same-store sales were flat against our (and consensus) expectations for [them to be] down mid- to high-single-digit percent.”
Mager said the sector “was helped by cooler weather and gift-card redemptions.” She added, “Most companies appear to have finished the quarter with clean inventory levels.”
Retailers are going to need to be lean and mean this year. Several equity firms, including Goldman Sachs, expect continuing price declines in consumer electronics, especially flat-panel TVs. Price points are expected to drop 30 percent this year on flat panels and total volume growth could rise at least 15 percent. As the industry saw in the fourth quarter of 2006, this could steer shoppers away from apparel.
Related Articles
You May Also Like
Craig Johnson, president of Customer Growth Partners, said while there was no “mathematically direct parallel” between apparel and flat-panel television sales, “there is more of an indirect substitution effect.
“The year-over-year 15 percent increase in electronics for the holiday has been driven by flat-panel televisions,” Johnson explained. “Apparel has only seen a 5 percent year-over-year growth from December 2005 to December 2006. Electronics have had a triple-growth rate. While statistically you can’t deduce this tripling from loss apparel sales, I suspect there is an indirect substitution effect.”